Enterprise Product Partners (NYSE: EPD) has been a reliable performer in the midstream sector, showcasing consistency and steady growth over the years. As we delve into the second-quarter results of this pipeline company, it becomes evident that Enterprise is poised to elevate its growth trajectory through a series of ambitious projects in the pipeline.
The key to Enterprise’s success lies in its unwavering consistency, exemplified by its impressive track record of increasing distributions for 26 consecutive years. In the second quarter, the company reported a nearly 11% increase in total gross-operating margin, reaching $2.4 billion. Additionally, its adjusted EBITDA surged by 10% to nearly $2.4 billion, underlining the company’s robust financial performance.
Despite a slight dip in adjusted free cash flow due to increased capital expenditures on new growth projects, Enterprise is strategically navigating its investment strategy. The company has resumed its growth projects post-pandemic slowdown, with plans to allocate significant capital towards expansion initiatives in the upcoming years.
With approximately $6.7 billion worth of projects currently under construction, Enterprise aims to fortify its position in the export markets. The expansion of the Enterprise Hydrocarbons Terminal in the Houston Ship Channel and the proposed Sea Port Oil Terminal project are clear indications of the company’s strategic focus on capturing market opportunities.
Looking ahead, Enterprise anticipates substantial growth from these projects, projecting an incremental annual gross-operating margin of about $1.4 billion by 2025. This anticipated growth aligns with the company’s historical average return on invested capital of about 13%, signaling a promising outlook for future profitability.
Furthermore, Enterprise’s declared quarterly distribution of $0.525 per unit for Q2 reflects a 5% increase year over year and underscores the company’s commitment to delivering value to its investors. With a forward yield of approximately 7.2% and a robust distribution-coverage ratio of 1.6 times, Enterprise’s financial health remains robust and well-positioned for sustained growth.
In terms of valuation, Enterprise currently trades at a forward-enterprise value-to-adjusted-EBITDA (EV/EBITDA) multiple of about 9.5, presenting an attractive buying opportunity compared to historical levels. As the company embarks on an upswing in growth and leverages its integrated systems in the U.S., investors are encouraged to consider the long-term potential of Enterprise Products Partners.
With a proven track record of consistent performance, strategic growth initiatives, and attractive valuation metrics, Enterprise Products Partners emerges as a compelling investment opportunity in the midstream sector. Stay tuned for further updates on the company’s growth trajectory and potential market impact, exclusively on Extreme Investor Network.
*Disclaimer: This article was inspired by a piece originally published by The Motley Fool.