Enterprise Products Partners LP EPD has lost 15.6% month to date (MTD), marginally outperforming the 15.9% decline of the composite stocks belonging to the industry. Among notable midstream companies, Kinder Morgan Inc KMI and Enbridge Inc ENB recorded declines of 9.6% and 5.6%, respectively.

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Examining the data on unit volumes traded since the start of this month, it is clear that the stock has experienced high volatility recently, with volume spikes accompanying significant price declines. The broader macroeconomic driver behind the spike in the volume of units traded is the ongoing U.S.-China trade war.  

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With the volume data reflecting periods of intense selling pressure, should investors join the crowd? Before proceeding, let’s delve deeper into the midstream energy giant’s fundamentals and the broader business landscape.

$7.6B Project Backlogs Secure EPD’s Additional Cashflows

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 cash flows 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 7.4%, which is higher than the 7.1% yield of the composite stocks belonging to the industry.

Like EPD, the business models of Kinder Morgan and Enbridge are backed by stable fee-based revenues.

Kinder Morgan’s position as a leading midstream service provider is reinforced by a network of pipeline and storage assets that operate under long-term take-or-pay contracts. These contracts ensure that shippers pay for the capacity reserved, whether they utilize it or not, which provides a steady stream of revenues. This structure allows KMI to generate stable earnings, primarily insulated from fluctuations in the volume of natural gas transported, offering significant stability to its bottom line.

Similarly, Enbridge benefits from the long-term, fee-based nature of its midstream operations. Its pipelines transport 20% of the total natural gas consumed in the United States. The company generates stable, fee-based revenues from these midstream assets, as they are booked by shippers on a long-term basis, minimizing commodity price volatility and volume risks.

Adding to its stability, ENB will generate incremental cash flows from its C$29 billion backlog of secured capital projects, which include liquids pipelines, gas transmission, gas distribution and storage, and renewables. The maximum in-service date is 2029.

Distribution Yield

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Strategic Growth & Tech-Driven Efficiency Fuel EPD’s Momentum

In 2024 and early 2025, Enterprise Products completed the construction of two new natural gas processing plants in the Permian Basin, bolstering its infrastructure for increased hydrocarbon movement. The partnership also acquired Pinon Midstream, enhancing its sour gas treating and gathering capabilities, and secured joint venture interests in the Midland to ECHO 1 crude oil pipeline, as well as its seventh and eighth fractionators.

Further reinforcing its extensive asset base, EPD transported 12.9 million barrels of oil equivalent per day in 2024, peaking at 13.6 million barrels per day in the fourth quarter. EPD’s 2025 expansion plans include commissioning two additional gas processing plants in the Permian, the Bahia NGL pipeline, Frac 14, the first phase of its NGL export facility on the Neches River and continued expansions of the ethane and ethylene terminal at Morgan’s Point. These align with the partnership’s long-term strategy to scale exports and achieve its ambitious target of moving more than 100 million barrels of hydrocarbons per month by 2027???.

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.

Cost-Efficient Expansion Keeps EPD Ahead in LPG Export Race

Enterprise Products remains steadfast in maintaining its leadership in LPG exports despite increasing competition from new projects. The partnership is focused on cost-effective brownfield expansions rather than investing in expensive greenfield developments. EPD emphasizes that its expansion capital is significantly lower than that required for greenfield projects, making its approach more economical and competitive. Management reaffirmed its commitment to retaining its strong position by providing services that are more favorable to customers than competitors. This strategy ensures that EPD continues to dominate the LPG export market while optimizing its existing infrastructure to enhance efficiency and maintain cost advantages.

Should Investors Bet on EPD?

On the valuation front, EPD is relatively undervalued, with the stock trading at a 9.57x trailing 12-month enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA), which is a discount compared with the broader industry average of 11.19x. KMI and ENB are trading at 13.40x and 14.92x EV/EBITDA, respectively.

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Thus, considering the positive developments and the long-term potential looking attractive, investors should bet on the undervalued stock. The partnership 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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This article originally published on Zacks Investment Research (zacks.com).

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