Enterprise Products Partners L.P. (EPD) reported stellar third quarter fiscal 2011 results on November 2, buoyed by natural gas, natural gas liquid (NGL) and crude oil production growth in the shale regions as well as strong demand for NGLs in the U.S. petrochemical industry and global markets.
Third Quarter Recap
The quarter’s earnings per unit of 55 cents were fairly ahead of the Zacks Consensus Estimate of 50 cents and improved 206% from 18 cents earned in the year-ago period. Revenues in the quarter shot up 40% year over year to $11.3 billion.
Quarterly distribution at Enterprise increased 5.2% year over year to 61.25 cents per common unit, or $2.45 per unit on an annualized basis. Distributable cash flow of $856 million provided a solid coverage of 1.7x. The partnership retained $341 million in cash flow, thereby reducing its financing needs.
(Read our full coverage on this earnings report: Enterprise Prospers on Vol Growth)
Agreement of Analysts
Looking at the estimates’ revision trends, it becomes clear that the analysts project an optimistic outlook for Enterprise’ fourth quarter 2011 and year-end earnings.
Of the total 10 analysts covering the stock, 4 have raised their estimates for the fourth quarter, while none of the analysts has moved in the opposite direction over the last 30 days. For fiscal 2011, 4 (out of 12) analysts have upped their estimates, while none made a downward revision in the last 30 days.
However, over the last 7 days, 3 analysts and 5 analysts have increased their projections for fourth quarter and fiscal 2011, respectively. No downward estimate change was witnessed.
Magnitude of Estimate Revisions
Taking into effect the analysts’ earnings revisions, the Zacks Consensus Estimate for the fourth quarter went up to 54 cents from 53 cents 30 days ago and 52 cents recorded 7 days ago.
For the full year, the earnings estimate increased to $2.06 from $1.99 in the last 30 days. A week earlier, the estimate was $2.02.
Earnings Surprise
With respect to earnings surprise, Enterprise showed a positive trend in the last 4 quarters. The company has recorded a minimum surprise of 4.55% in the fourth quarter of 2010 to the maximum of 10.00% in the third quarter of 2011. On average, the earnings surprise has been 8.04%.
Our Recommendation
Enterprise Products, a leading master limited partnership (MLP), is engaged in providing a wide range of midstream energy services to the producers and consumers of natural gas, NGL, and crude oil.
We continue to view Enterprise as a core holding in an MLP portfolio, given its string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position. The partnership is one of the largest fully integrated midstream service providers with a positive long-term outlook given its significant geographic and business diversity.
Enterprise, which competes with peers such as Kinder Morgan Energy Partners L.P. (KMP) and Enbridge Energy Partners L.P. (EEP), currently retains a Zacks #2 Rank (which translates into short-term Buy rating).
ENBRIDGE EGY PT (EEP): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
KINDER MORG ENG (KMP): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment