Enterprise Products Partners Q3: Nothing Has Changed, Still My Favorite MLP

seekingalpha11-02

Enterprise Products Partners L.P. has delivered yet another quarter of material cash flow growth, while maintaining a robust balance sheet.From Q3 2024 earnings data points and messages, it is clear ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2480214298?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1152513641/image_1152513641.jpg","is_english":true,"pubTime":"2024-11-02 21:15","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2480214298","market":"fut","top_or_hot":-1,"title":"Enterprise Products Partners Q3: Nothing Has Changed, Still My Favorite MLP","media":"seekingalpha","content":"<div>\n<p>Enterprise Products Partners L.P. has delivered yet another quarter of material cash flow growth, while maintaining a robust balance sheet.From Q3 2024 earnings data points and messages, it is clear ...</p>\n\n<a href=\"https://seekingalpha.com/article/4732201-enterprise-products-partners-q3-nothing-has-changed-still-my-favorite-mlp\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Enterprise Products Partners Q3: Nothing Has Changed, Still My Favorite MLP</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nEnterprise Products Partners Q3: Nothing Has Changed, Still My Favorite MLP\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-02 21:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4732201-enterprise-products-partners-q3-nothing-has-changed-still-my-favorite-mlp><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Enterprise Products Partners L.P. has delivered yet another quarter of material cash flow growth, while maintaining a robust balance sheet.From Q3 2024 earnings data points and messages, it is clear ...</p>\n\n<a href=\"https://seekingalpha.com/article/4732201-enterprise-products-partners-q3-nothing-has-changed-still-my-favorite-mlp\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4732201-enterprise-products-partners-q3-nothing-has-changed-still-my-favorite-mlp","article_id":"2480214298","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1152513641/image_1152513641.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2480214298","pubTimestamp":1730553300,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Enterprise Products Partners L.P. has delivered yet another quarter of material cash flow growth, while maintaining a robust balance sheet.From Q3 2024 earnings data points and messages, it is clear t","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","LU1150488218.USD":"First Eagle Amundi Income Builder AU2-MD USD","EPD":"Enterprise Products Partners L.P","BK4561":"索罗斯持仓","BK4590":"PTP","BK4588":"碎股","BK4144":"石油与天然气的储存和运输","LU1150488135.SGD":"First Eagle Amundi Income Builder AHS-MD SGD-H"},"translate_title":"企业产品合作伙伴Q3：一切都没有改变，仍然是我最喜欢的MLP","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EPD":0.9},"content_text":"Enterprise Products Partners L.P. has delivered yet another quarter of material cash flow growth, while maintaining a robust balance sheet.From Q3 2024 earnings data points and messages, it is clear that EPD has stepped up its investment game.Given EPD's upper investment grade credit rating, 1.7x distribution coverage and inherently stable business model, the risks of funding the ambitious growth at the expense of financial safety are limited.In this article, I explain in more detail why EPD, which was already my favorite MLP pick, has become an even more attractive durable income play after the recent Q3 earnings report.   thexfilephoto  I have been actively covering Enterprise Products Partners L.P. (NYSE:EPD) since the start of this year with the recent article issued back in late July, when EPD circulated its Q2, 2024 earnings report. The investment case was rather straightforward and consisted of the following building blocks:  Upper investment grade balance sheet (which is not that common in the MLP space). One of the highest distribution coverage levels in the sector, at around 1.9x. Fee-based business model, which mitigates the commodity price risk. Inherently durable business model that is underpinned by system-critical infrastructure assets. Compelling valuations, with EV/EBITDA being below 10x.  Considering the points above and the offered yield by EPD of roughly 7.3%, I labeled this particular MLP as my favorite, especially for capturing truly durable and attractive income streams. So far this year, EPD has delivered ~ 17% in total returns, which, theoretically, might raise questions whether the Partnership is trading in an overvaluation territory. However, looking at the Q3 2024 earnings report and the current fundamentals, I doubt that this is the case. In fact, in my opinion, EPD has got even more attractive income play after the recent data points. Let me explain. Thesis review Financial performance and serviced volume wise, EPD delivered yet another robust quarter. It reported Q3, 2024 adjusted EBITDA of $2.4 billion, compared to $2.3 billion the same quarter last year. Importantly, the adjusted cash flows from operations, which reflects the actual cash flow generation better, increased by 4% to $2.1 billion. From the handled volume perspective, EPD set 5 individual records, which just as in the case of financial performance, was accommodated by several growth CapEx assets coming online and fully contributing to the Q3 financials (i.e., mostly 3 new natural grad processing plants). This dynamic just shows how important it is to keep a healthy level of investments to secure at least above inflation-rate growth. Now, in this particular context, it is worth underscoring that EPD has stepped up its investment game. The Management has updated 2025 estimated growth CapEx range to $3.5 billion to $4 billion due to emerging opportunities in the MLP space that are primarily associated with the demand for natural gas (stemming from AI-driven data centers). Here, the quote from Jim Teague — Co-CEO during the recent earnings call captures the story nicely: We're excited about the number of inbounds that we're getting related to new natural gas demand in Texas from both datacenters and new gas-fired power plants that would be built under the Texas Energy Fund. There are a lot of people talking about exposure to datacenters. It seems that it's a very sexy thing to say, and everybody who has a piece of pipe in Texas is talking it up. The reality is there's a very small list of companies with pipeline and storage assets best positioned to benefit from this build-out, and the Enterprise is one of them. There are two takeaways from this:  Data center / AI-driven demand for natural gas is indeed real, and there is already a tangible traction in place. And this is more interesting, which I had not considered before, the chances are high that not all MLPs will benefit equally from this. Instead, the ones with more established and efficient infrastructure will likely manage to compete and attract the necessary demand better. EPD with its market cap of ~ $62 billion is clearly well-positioned for this.  On top of the organic CapEx spend, EPD also seems quite active on the M&A front, by, for example, acquiring Piñon Midstream for $950 million. There, the underlying assets offer strong synergies to EPD's current Permian processing footprint through advanced and already established treating services and deep NGL-related value (asset) chain. The question or theoretical risk could around the financing and the level of incremental financial risk that all of these expansion plans imply. Looking deeper at the current cash flow generation of EPD and considering the state of the balance sheet, there is no material reason why we should get concerned. First, currently, the leverage ratio for EPD stands at 3.0x, which is one of the lowest in the sector and a clear indicative of a robust capital structure (as confirmed by the upper investment grade credit rating). Since EPD has established its target leverage range between 2.75x and 3.25x (to maintain upper investment grade credit rating), it has some room left to assume debt without breaching the ceiling level. Even if the leverage ratio exceeds 3.25x, I doubt that it will be for a long time and significantly above that given EPD's stipulated target range and commitment to maintaining the current credit rating. Second, even though EPD has paid out ~ $4.8 billion (including $252 million of buybacks) to its limited partners over the TTM period, it has managed to retain approximately $3.7 billion of cash in the books (i.e., the TTM adjusted cash flow from operations payout stands at 56%). What this means is that, actually, the lion's share of the projected CapEx spend could be covered by using equity and only relatively small portions of additional debt, thereby allowing EPD to keep the leverage ratio stable (at least when we speak about CapEx and not M&A). Third, and this is critical to understand, each investment and especially M&A comes with its own cash flow contribution, which offsets the leverage costs, provides incremental EBITDA and, ultimately, balances the leverage profile. This is precisely what we can see from Q3, 2024 financial dynamics, where mostly because of the new assets, EPD has managed to register decent growth. The data below illustrates the growth CapEx list with the forecasted in-service dates. The list encompasses $6.9 billion of investment, representing 11% of EPD's market cap. EPD 3Q 2024 Earnings Support Slides The positive thing here is that already next year in Q3 we should experience a notable boost to EPD's cash generation from many larger scale projects kicking in. The bottom line All in all, EPD has delivered a decent quarter yet again, registering positive cash flow growth dynamics and, more importantly, sending clear signals to the investors that the intention is to expand the business going forward. Effectively, this means that EPD could be considered a durable income case, where the underlying income streams will be subject to decent growth going forward. Namely, EPD provides a solid defense with a yield of 7.3% and tangible (already in the CapEx realization process) income growth, where the funding mix is not that heavily weighted towards additional debt. We have to of course be cognizant of the risks to such a thesis with the commodity price risk being the most critical one. However, as explained in my previous article, there are several fundamental risk mitigating factors in place:  ~ 90% of EPD's revenues are fee-based, with largely neutralized commodity price risk. EPD's distribution coverage stands at 1.7x, which gives plenty of merging of safety in case there are negative shocks in the market. The fact that EPD can retain so huge amounts of liquidity and has already its balance sheet within the target or upper investment grade range, means that it can secure growth without impairing it financial profile. Finally, we have to consider that this additional growth per definition comes with fresh cash flows, which in the case of declining financials could further offset the potentially negative impact.   In a nutshell, EPD remains my favorite MLP income pick.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2480214298"}