Enterprise Products Partners LP EPD is set to report first-quarter 2025 results on April 29, before the opening bell.

The Zacks Consensus Estimate for first-quarter earnings is pegged at 69 cents per share, implying an improvement of 4.6% from the year-ago reported number. There has been one downward earnings estimate revision over the past seven days. The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $14.1 billion, suggesting a 4.5% fall from the year-ago actuals.

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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 1.8%. This is depicted in the graph below:  

EPD’s Q1 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 -0.36% and it currently carries a Zacks Rank #2. 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.

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 December quarter, with its pipeline network spread across 50,000 miles, transporting natural gas, NGLs, crude oil, refined products and petrochemicals. The partnership is also expected 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 $1,456.8 million, higher than the $1,340 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.

EPD’s Price Performance & Valuation

EPD's stock has soared 15.6% over the past year compared with the 15.9% rise of the composite stocks belonging to the industry. Kinder Morgan, Inc. KMI and Enbridge Inc. ENB, two other leading midstream energy players, have gained 51.4% and 38.2%, respectively.

One-Year Price Chart

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EPD appears relatively undervalued, suggesting the potential for price increases. The partnership's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 10.09 compared with the industry average of 11.74, reflecting that it is trading at a discount.

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Investment Thesis of EPD

Enterprise Products has low exposure to volume and commodity price risks. This is because 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 generating stable fee-based revenues. EPD will secure additional cash flows since it has $7.6 billion of approved key projects under construction.

In addition to increasing its distribution for over two decades, the partnership boasts a strong credit rating. It also returns capital to unitholders through a unit buyback program. As part of its $2 billion repurchase plan, the leading midstream energy player has already utilized nearly 60% of the authorized program. (See the ZacksEarnings Calendar to stay ahead of market-making news.)

Are ENB & KMI’s Business Models Stable?

Like EPD, the business models of Kinder Morgan and Enbridge are also 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.

Last Word

Considering Enterprise Products’ stable business model and attractive valuation, now is the right time for investors to bet on the stock.

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

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

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