Why Hold Strategy is Apt for Enterprise Products (EPD) Now
Enterprise Products Partners LP EPD is a leading midstream energy player with lower exposure to volume and price risks. Since the beginning of this year, the stock has jumped 7.1%, outpacing the 6.8% growth of the composite stocks belonging to the industry.
Factors Working in Favor
Enterprise Products, currently carrying a Zacks Rank #3 (Hold), has a stable business model and is not significantly exposed to the volatility in oil and gas prices. The firm generates stable fee-based revenues from its extensive pipeline network that spreads across more than 50,000 miles, transporting natural gas, natural gas liquids (NGLs), crude oil petrochemicals and refined products.
The midstream infrastructure provider also has storage assets that can store more than 260 million barrels of NGL, petrochemical, refined products and crude oil. These assets can also hold 14 billion cubic feet of natural gas. Moreover, Enterprise Products has $5.8 billion of major capital projects under construction that are likely to provide incremental fee-based revenues.
The partnership’s balance sheet is strong enough to sail through any unforeseen tough business environment. The liquidity profile of Enterprise Products is impressive, as the firm reported its consolidated liquidity at $4.1 billion, which incorporates unrestricted cash along with available borrowing capacity under its revolving credit facilities.
Risks
Enterprise Products has several assets that have been providing midstream services for many years. This has raised the possibility of investing massive capital in maintaining those infrastructures. Thus, in the future, Enterprise Products could increase maintenance or repair expenses.
A slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output, is hurting production. This is affecting the demand for transportation and storage demand to some extent.
Stocks to Consider
Better-ranked players in the energy space include Halliburton Company HAL, PBF Energy PBF and Antero Midstream Corporation AM. While PBF Energy sports a Zacks Rank #1 (Strong Buy), Halliburton and Antero Midstream carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Halliburton is well known for providing products and services to energy companies. Over the past 30 days, HAL has witnessed upward earnings estimate revisions for 2023 and 2024, respectively.
In North America, PBF Energy is a leading independent refiner. PBF has lower exposure to debt capital as compared to composite stocks belonging to the industry.
Antero Midstream generates stable cashflows, banking on its midstream assets involved in gathering, compression, processing and fractionation activities. The properties are centered around the prolific Appalachian Basin. Over the past 30 days, Antero Midstream has witnessed upward earnings estimate revisions for 2023.
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Halliburton Company (HAL) : Free Stock Analysis Report
Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report
Antero Midstream Corporation (AM) : Free Stock Analysis Report
PBF Energy Inc. (PBF) : Free Stock Analysis Report
