Last Tuesday, Enterprise Products Partners LP EPD reported solid fourth-quarter 2024 earnings, driven by strong midstream operations, contributing to a promising business outlook.

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

Before analyzing the factors driving this positive outlook, let’s first review the fourth-quarter results.

EPD’s Q4 Earnings Snapshot

Enterprise Products’ fourth-quarter 2024 adjusted earnings per limited partner unit of 74 cents beat the Zacks Consensus Estimate of 69 cents. The bottom line also increased from the year-ago level of 72 cents.

However, total quarterly revenues of $14.2 billion missed the Zacks Consensus Estimate of $14.3 billion. The top line declined from $14.6 billion reported in the prior-year quarter. For more details, read our blog: Enterprise Q4 Earnings Top Estimates, Revenues Decrease Y/Y.

Strategic Investments Fuel EPD’s Long-Term Growth Outlook

Enterprise Products, a top-tier North American midstream service provider, boasts a vast and diversified asset portfolio, which includes more than 50,000 miles of pipelines and a storage capacity of 300 million barrels. Shippers utilize these assets in long-term contracts to transport and store natural gas liquids, crude oil, refined products and petrochemicals. The partnership also has 14 billion cubic feet of natural gas storage capacity, securing stable fee-based revenues.

EPD is set to generate additional fee-based earnings with $7.6 billion worth of major capital projects either currently in service or under construction. These project backlogs will not only secure stable cashflows but also generate handsome returns for unitholders.

Supported by its stable and resilient business model, Enterprise Products has achieved more than two decades of distribution hikes. The current distribution yield of the partnership is 6.5%, higher than 5.9% of the composite stocks belonging to the industry.

Distribution Yield

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EPD’s Efficiency Path: Cleaning Sour Gas & Leveraging Big Data

EPD has acquired Piñon Midstream, strengthening its ability to process natural gas in the Permian – the most prolific basin in the United States. This includes adding special equipment to clean "sour" natural gas (gas with impurities like sulfur) and safely handle unwanted byproducts like acid gas. These new facilities will fit into EPD's existing system for handling natural gas liquids (NGLs), making its operations more efficient and comprehensive.

Also, the partnership uses advanced technology to make its pipelines run more efficiently and profitably. It analyzes massive amounts of data in real-time to predict issues, plan maintenance and optimize operations.

EPD to Capitalize on Promising Market Opportunities

Data centers and gas-fired power plants are expected to drive demand for natural gas, supported by initiatives like the Texas Energy Fund. Enterprise Products is among the few midstream players with the infrastructure—such as pipelines and storage facilities—to meet this demand efficiently. This makes the partnership uniquely capable of tapping into this growing market.

Ethylene is a critical component in many industrial applications. U.S. production is highly competitive because it uses ethane (a byproduct of natural gas) as feedstock, which is cheaper than the naphtha used in Europe. Enterprise Products anticipates growing opportunities to export ethylene, especially to Europe, where some smaller and less efficient chemical plants may shut down. This could increase demand for U.S. exports.

Valuation Looks Attractive: Right Time to Bet on EPD?

Notably, the partnership targets exporting 100 million barrels of hydrocarbons per month by 2027, highlighting its long-term growth strategy. Also, Enterprise Products maintains a well-structured debt profile. Despite having $32.2 billion in debt, 98% is at fixed interest rates, and the company benefits from a low average borrowing cost of 4.7%.

Backed by the positives, the stock has gained 34.3% in the past year compared with the 41.6% growth of the composite stocks belonging to the industry. Among notable midstream companies, Kinder Morgan Inc KMI and Enbridge Inc ENB recorded gains of 69.4% and 38.1%, respectively.

One-Year Price Chart

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Although the stock lagged behind the industry, its valuation remains attractive compared to composite stocks. The partnership is trading at a 10.52x trailing 12-month enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA), which is below the broader industry average of 12.19x.

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Thus, with the long-term potential looking attractive, it’s the right opportunity now to buy the undervalued stock. The stock carries a Zacks Rank #2 (Buy) at present.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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