Will Price Volatility Hurt Enterprise Products Partners?

On Sep 9, 2016, we issued an updated research report on a leading master limited partnership (MLP), Enterprise Products Partners, L.P. (NYSE:EPD) .

Enterprise Products Partners increased its quarterly cash distribution rate by 5.3% to $0.40 per common unit or $1.60 per unit on an annualized basis. This is 48th consecutive quarterly increase in distribution by the partnership. With its diverse set of natural gas liquid (NGL), natural gas, crude oil and refined products midstream infrastructure assets, the partnership possesses fundamental strength, which should continue to support distribution growth.

Enterprise Products Partners added growth projects of around $2.7 billion in 2015, of which projects valued at about $1.8 billion were added in the fourth quarter. Furthermore, projects worth $300 million were added in the first quarter of 2016. In fact, the partnership expects to bring online projects valued at about $2.2 billion this year. Moreover, Enterprise Product Partners expects to commission projects of about $5.2 billion in 2017–18. The partnership’s proper execution of its growth strategy has helped it overcome the external environment turbulence and post above-average results.

Despite the recent macro issues, Enterprise Products Partners assured that 96% of its 2015 revenues came from its top 200 customers, of whom 76% are investment grade credit rated or secured by letters or credit. This adds to the partnership’s credibility and increases unitholder confidence.

Though we believe that Enterprise Products Partners possesses solid cash flow stability from quality pipeline and storage assets and geographic diversity, factors like volume risk and commodity price exposure can negatively impact near-term results. We also remain apprehensive about a volatile NGL pricing environment.

ENTERPRISE PROD Price and Consensus

ENTERPRISE PROD Price and Consensus | ENTERPRISE PROD Quote

Moreover, three of Enterprise Products Partners’ LPG export cargoes were cancelled for Jul 2016 and five additional cargoes were cancelled in Aug 2016. These cancellations reflect the unfavorable spreads between the U.S and international markets.

The Gulf Coast and Gulf of Mexico regions are prone to storms and hurricanes. The partnership’s significant presence in these regions will continue to expose its results to such weather-related uncertainties.

Zacks Rank and Stocks to Consider

Enterprise Products Partners currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector are Matador Resources Company (NYSE:MTDR) , NGL Energy Partners LP (NYSE:NGL) and Enviva Partners L.P. (NYSE:EVA) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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