Is Enterprise Products Partners stock purchased as the company strengthens its growth?
Enterprise Product Partners (NYSE:EPD) It continued to show its consistent nature when it reported fourth quarter revenue results on Tuesday. meanwhile, Pipeline Operator Continuing to increase growth capital expenditures (Capex) I believe there are growing strong opportunities.
Midstream players have long been a favorite among income investors, with the current stock price having a forward yield of 6.6%.
But is it now a good time to buy stocks?
When it comes to revenue reports, enterprise product partners typically run a stable, rate-based midstream business, so they don’t have too many surprises with their sleeves. This was seen in the fourth quarter when the company increased its total operating profit by 3% to $2.63 billion. Meanwhile, adjusted revenue before interest, taxes, depreciation and amortization (EBITDA) increased 4%, up nearly $2.6 billion.
Distributed cash flow (operating cash flow to maintenance CAPEX) rose 5% to $2.16 billion. Adjusted free cash flow was $336 million. As the company moved into growth mode, adjusted free cash flow declined year-on-year.
Enterprise Products Partners had a quarterly distribution coverage ratio based on distributable cash flows. 2024 ended with a leverage ratio of 3.1 (defines metrics as net debt adjusted for equity credits in junior subordinated notes (hybrids) divided by adjusted EBITDA). It is generally considered a low leverage ratio in the midstream industry. 3.5 and 4.5 are common.
We paid a quarterly distribution of $0.535 per unit, an increase of 3.9% compared to a year ago. Meanwhile, its distribution coverage ratio shows that there is room for the company to continue to raise payments over the next few years. Enterprise Products Partners has increased its distribution for the 26th consecutive year. It also spent $63 million in the quarter on repurchases of 2.1 million units.
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Going forward, management plans to spend between $4 billion and $4.5 billion on growth capital expenditures this year (except acquisitions). This is up from $3.9 billion in 2024, a significant increase from $1.6 billion spent in 2022 after cutting growth capacity in the first few years of the pandemic.
Currently, Enterprise Products Partners has $7.6 billion in major growth projects under construction. Most of these projects are expected to be online between the second half of 2025 and the end of 2026. This year, there are projects worth around $6 billion. The company has typically achieved a return of around 13% per year on projects in recent years, allowing it to increase its EBITDA by about $780 million as these projects increase in 2026.
According to comments on the latest revenue call, Texas Queue currently has 2 billion cubic feet of natural gas demand and 15 potential power plant projects with demand of around 1.2 billion cubic feet per day. There are 20 data center projects. We believe 15% of data center projects and half of power plant opportunities are showing good signs of progress.
However, the company has struggled to get a long-standing Seaport Oil Terminal (Spot) project on the line, given the long delays that it has been experienced in obtaining permits. If the environment changes, we don’t know if we will reach a final investment decision this year.
Turning to guidance, Enterprise forecasts mid-single-digit percentage cash flow growth in 2025. However, 2026 appears to be a much bigger year of growth given the expected project completion timeline.
Enterprise product partners trade at multiples of 9.8 – ebitda (EV/EBITDA) based on analysts’ 2025 estimates. EV/EBITDA is the most common metric used to cherish mid-class companies as they spend a lot of money building long-life assets such as pipelines. Enterprise Value considers the liabilities that companies incur to build these projects, but EBITDA considers non-cash spreads over the life of these assets as these costs have already been acquired through EV metrics. Delete depreciation expenses.
Enterprise Products Partners’ current EV/EBITDA multiples are below the range that was historically traded prior to the pandemic, well below the 13.7 multiple. It is usually traded at mid-stream space premiums due to consistency and strong balance sheets.
As the company prepares to drive growth, 2026 appears likely to be a major year for EBITDA growth. Buy stocks at the current level. Investors can acquire stocks at historically attractive prices and enjoy robust yields while waiting for growth to rise.
Consider this before purchasing stocks at Enterprise Product Partners.
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Jeffrey Sayler There is an enterprise product partner position. Motley Fool recommends enterprise product partners. To Motley’s fool Disclosure Policy.
