Enterprise Products Partners (NYSE: EPD) continued to show his consistent nature when it reported the win results in the fourth quarter on Tuesday. Meanwhile the piper continues to increase the expenditure of the growth capital (capex) Because it sees growing strong opportunities.
The MidStream player has long been a favorite among income investors and has a forward return of 6.6%against the current stock price.
But is a good time now to buy the stock?
When it comes to his win reports, partners of Enterprise Products usually do not have too many surprises in store, because it manages a steady, reimbursements-based Midstream-Business. That could be seen in Q4, when the company grew its total gross operating result by 3% to $ 2.63 billion. The adjusted income before interest, taxes, depreciation and amortization (EBITDA) meanwhile rose by 4% to almost $ 2.6 billion.
It generated the distributable cash flow – operational cash flow minus maintenancecapex – of $ 2.16 billion, an increase of 5%. The adjusted free cash flow was $ 336 million. With the company that moves in growth mode, the adapted free cash flow fell year after year.
Enterprise Products Partners had a distribution coverage ratio of 1.8 in the quarter based on the distributable cash flow. It ended 2024 with a lever ratio of 3.1 (it defines that metriek as a net debt adapted for stock credit in junior disadvantaged notes (hybrids) divided by adapted EBITDA.) This is generally considered a low lever ratio for the middle -power industry, where levels Between 3.5 and 4.5 are common.
It paid a quarterly division of $ 0.535 per unit, which was an increase of 3.9% compared to a year earlier. In the meantime, the distribution coverage ratio indicates that the company has room to continue to increase its payouts in the coming years. Enterprise Products Partners has already increased its distributions for 26 consecutive years. It also spent $ 63 million on buying back 2.1 million units in the quarter.
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Looking ahead, management is planning to spend between $ 4 billion to $ 4.5 billion in growth capital this year (excluding acquisitions). That has risen from $ 3.9 billion in 2024 and a large increase compared to the $ 1.6 billion that it spent in 2022 after cutting back on the Groeicapex during the first few years of the pandemic.
Enterprise Products Partners currently has $ 7.6 billion in large growth projects under construction. Most of these projects are planned to get online between the second half of 2025 and the end of 2026. About $ 6 billion in the projects are planned for this year. The company has generally achieved about an annual return of 13% on its projects in recent years, so it could see about a boost of $ 780 million in its EBITDA in 2026 while these projects are rising.
According to comments about the last profit call, it currently has 20 data center projects in the queue in Texas with 2 billion cubic foot a day of demand for natural gas and 15 potential power plant projects with demand up to around 1.2 billion cubic foot a day. It is of the opinion that 15% of the data center projects and half of the possibilities for power plants show good signs of progress.
However, the company has difficulty getting its long -awaited Zeepport oil terminal (spot) project across the line, given the long delays that the company has experienced in obtaining the permits. Changed with the environment, it does not know whether it will take a final investment decision this year.
With regard to guidance, prediction of Enterprise Midden-Single percentage of cash flow growth before 2025. However, it looks like 2026 is a greater growth year, given the expected timelines for completing projects.
Enterprise Products Partners is trading on a forward entrepreneurial value -bitda (EV/EBITDA) several of 9.8 based on estimates by analysts. EV/EBITDA is the most common metric used to appreciate midstream companies, because they spend a lot of money on building long-lived assets such as pipelines. Enterprise value takes into account the debts that companies build up to build these projects, while EBITDA removes non-contracting costs that spread from these assets over the entire lives, because those costs have already been laid down in the EV-Metric.
The current EV/EBITDA -LIFE of Enterprise Products Partners is under the reach where it is traded historically before the pandemic, and well under the multiple of 13.7 that the average MidStream Master Limited Partnership (MLP) has been traded between 2011 and 2016. Enterprise has Moreover, that typically traded on a premium in the middle current space due to the consistency and a strong balance.
With the company that is preparing to increase its growth and 2026 probably looks a large year for the growth of the EBITDA, I would buy the shares at the current level. Investors can get a share at a historically attractive price and enjoy a robust return while waiting for growth in growth.
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Geoffrey Seiler Has positions in Enterprise Products partners. The Motley Fool recommends Enterprise Products partners. The colorful fool has one disclosure policy.
