Enterprise Products Stays Resilient on Balance Sheet Strength

Enterprise Products Partners L.P. EPD has diversified assets for transporting and storing oil, natural gas and energy products between producers and consumers. This allows the leading midstream energy service provider to generate stable bee-based revenues.

Notably, for expansion and maintenance of their assets, midstream players incur huge capital expenditure, a significant proportion of which is taken as debt capital.

EPD’s diversified assets mainly include pipeline networks spanning more than 50,000 miles and liquids storage terminals with a capacity exceeding 300 million barrels, and other assets. Expansion and maintenance of these assets are crucial as the partnership generates stable and predictable fee-based income from long-term contracts by shippers who reserve capacity in these pipelines and storage facilities and ensure payment for capacity reserved, whether utilized or not. This helps EPD maintain a strong balance sheet.

Investors should note that Enterprise Products has $3.6 billion in liquidity which can be utilized for asset expansion and maintenance, as well as returning cash to unitholders, without requiring urgent borrowing.

The partnership has managed to borrow at a low weighted average interest rate of 4.7%, giving it an edge over its peers. EPD’s debt-to-capitalization ratio stands at 52.77%, relatively lower than the industry average of 57.15%.

Do KMI & WMB Have a Strong Balance Sheet Like EPD?

Kinder Morgan Inc. KMI andThe Williams Companies, Inc. WMB are other midstream players who also invest heavily in maintaining and expanding their assets. Like EPD, KMI and WMB generate stable, fee-based revenues under long-term contracts. KMI benefits from a lower debt-to-capitalization of 50.42%, while WMB has a higher debt-to-capitalization ratio of 65.18%.

EPD’s Price Performance, Valuation & Estimates

Shares of Enterprise Products have gained 2.4% over the past year compared with the 0.7% return of the composite stocks belonging to the industry.

From a valuation standpoint, EPD trades at a trailing 12-month enterprise-value-to-EBITDA (EV/EBITDA) of 10. 50X, below the broader industry average of 12.29X.

The Zacks Consensus Estimate for EPD’s 2025 earnings has been unchanged over the past seven days.

Enterprise Products currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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