Enterprise (EPD) Down 2% Despite Q2 Earnings & Revenue Beat

Enterprise Products Partners L.P.’s EPD stock price fell 2% despite reporting strong second-quarter results on Aug 3. Lower gross margin from propylene business, owing to declining average processing fees, probably worried investors.

Enterprise reported second-quarter 2022 adjusted earnings per limited partner unit of 64 cents, beating the Zacks Consensus Estimate of 63 cents. The bottom line improved from the year-ago quarter’s 51 cents per share.

Total quarterly revenues of $16,060 million surpassed the Zacks Consensus Estimate of $12,211 million. The top line significantly increased from $9,450 million in the prior-year quarter.

The strong results were driven by higher contributions from the NGL Pipelines & Services business.

Enterprise Products Partners L.P. Price, Consensus and EPS Surprise

Enterprise Products Partners L.P. Price, Consensus and EPS Surprise

Enterprise Products Partners L.P. price-consensus-eps-surprise-chart | Enterprise Products Partners L.P. Quote

Segmental Performance

Pipeline volumes in NGL, crude oil, refined products and petrochemicals were recorded at 6.6 million barrels per day (bpd), slightly higher than the year-ago quarter’s 6.5 million bpd. Natural gas pipeline volumes were 16.8 trillion British thermal units per day (TBtus/d), up from 14.2 TBtus/d a year ago. Also, marine terminal volumes increased to 1.7 million bpd from the year-ago quarter’s 1.6 million bpd.

Gross operating income at NGL Pipelines & Services increased from $1,098 million in the year-ago quarter to $1,327 million, primarily due to higher NGL pipeline transportation volumes.

Natural Gas Pipelines and Services’ gross operating income increased to $229 million from $202 million in the year-ago quarter. The upside was due to an increase in natural gas pipeline transportation volumes.

Crude Oil Pipelines & Services recorded a gross operating income of $407 million, which decreased from $419 million in the prior-year quarter.

Gross operating income at Petrochemical & Refined Products Services amounted to $421 million compared with $326 million a year ago, primarily due to higher butane isomerization volumes. Gross operating margin for the partnership from its propylene business declined significantly.

Cash Flow

Adjusted distributable cash flow was $2,018 million, up from $1,599 million a year ago, and provided coverage of 1.9X. The partnership retained $974 million of distributable cash flow in the June quarter. The partnership generated an adjusted free cash flow of $1,718 million compared with $1,086 million in the year-ago quarter.

Financials

For second-quarter 2022, Enterprise’s total capital investment was $383 million.

As of Jun 30, 2022, its outstanding total debt principal was $29.1 billion. Enterprise’s consolidated liquidity amounted to $4.1 billion. The total liquidity amount included unrestricted cash on hand and available borrowing capacity under its revolving credit facility.

Outlook

For 2022, Enterprise expects its growth capital spending at $1.6 billion. The partnership continues to expect sustaining capital expenditure of $350 million.

Zacks Rank & Other Stocks to Consider

Enterprise currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the energy space include Exxon Mobil Corporation XOM, BP plc BP and Range Resources RRC. While Range Resources carries a Zacks Rank #2, ExxonMobil and BP sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ExxonMobil’s upstream operation is benefiting from high oil price. Recently, XOM reported strong earnings thanks to higher realized commodity prices and solid refinery utilization, offset partially by increased ethane feed costs in North America. In 2022, ExxonMobil is likely to see earnings growth of 131%.

High oil prices are aiding BP’s upstream operations. Its sizable refining and marketing operations will protect it if the crude pricing scenario turns unfavorable again. For 2022, it is likely to witness earnings growth of 108.6%. Over the past few quarters, BP has successfully been reducing long-term debt.

Efficient operations and higher prices of commodities are aiding Range Resources in generating significant cashflows. For 2022, Range Resources is likely to witness earnings growth of 167.3%.

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