Enterprise Products Partners LP EPD is set to report third-quarter 2024 results on Oct. 29, 2024, before the opening bell.

The Zacks Consensus Estimate for third-quarter earnings is pegged at 66 cents per share, implying growth of 10% from the year-ago reported number. The estimate was revised downward by one analyst in the past seven days against no upward movement. The Zacks Consensus Estimate for third-quarter revenues is currently pegged at $13.7 billion, suggesting a 14.3% uptick from the year-ago actuals.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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EPD beat the consensus estimate for earnings in two of the trailing four quarters and missed the same twice, with the average surprise being 1.48%. This is depicted in the graph below:  

EPD’s Q3 Earnings Whispers

Our proven model doesn’t predict an earnings beat for EPD this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here.

The partnership has an Earnings ESP of -1.06% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

EDP Factors to Note

Enterprise Products is among the leading providers of midstream services in North America. The partnership is likely to have generated stable fee-based revenues in the September quarter, with its pipeline network spreading across 50,000 miles, transporting natural gas, NGLs, crude oil, refined products and petrochemicals. The partnership is also likely to have generated stable cashflows with a storage capacity of more than 300 million barrels for NGLs, crude oil, petrochemicals and refined products.

The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' NGL Pipelines & Services business segment is pegged at $1,339.6 million, higher than the $1,196 million recorded a year ago. The rising demand for NGL, used in various applications such as home heating, plastic production and fuel, is likely to have driven increased activity in the NGL Pipelines & Services business unit.

The Zacks Consensus Estimate for the gross operating margin from Enterprise Products' Natural Gas Pipelines & Services business segment is pegged at $295.1 million, higher than the $239 million recorded a year ago. The rising demand for natural gas as a cleaner-burning fuel is expected to have increased the need for midstream assets to transport and store larger volumes, contributing to the partnership’s Natural Gas Pipelines & Services business segment.

EPD’s Stock Price Performance & Valuation

EPD's stock has soared 13.5% over the past year compared with the energy sector’s rise of 5.8%. Kinder Morgan, Inc. KMI and Enbridge Inc. ENB, two other leading midstream energy players, have gained 57% and 37.7%, respectively.

One-Year EPD, KMI, ENB Stock Price Chart

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EPD appears relatively overvalued, suggesting the potential for price decreases. The partnership's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 9.74, which is trading at a premium compared to the energy sector average of 3.35.

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Investment Thesis of EPD

Enterprise Products has low exposure to volume and commodity price risks. This is due to the fact that its midstream assets are contracted by shippers for the transportation of natural gas, NGLs, crude oil, refined products and petrochemicals over extended periods. Thus, the partnership will continue to generate stable fee-based revenues. EPD will secure additional cashflows since it has $6.7 billion of approved key projects under construction.

In addition to increasing its distribution for 26 consecutive years, the partnership boasts a strong credit rating. However, many of EPD's assets have been operational for a significant period and thus necessitate considerable investment in maintenance. As these assets age, they require frequent and often costly upkeep to ensure they continue to function effectively and safely.

Last Word

Although Enterprise Products has a stable business model, investors should wait for a better entry point since the partnership is overvalued compared to the energy sector.

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Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report

Enbridge Inc (ENB) : Free Stock Analysis Report

Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report

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