Mizuho Securities has maintained its Outperform rating on shares of Enterprise Products Partners L.P. (NYSE: NYSE:EPD), with a steady price target of $34.00.
The firm's analysis follows Enterprise Products' recent acquisition of Pinon Midstream for $950 million, marking the company's first significant transaction since its early-2022 purchase of Navitas Midstream.
The acquisition is viewed positively by Mizuho, drawing comparisons to the Navitas deal and highlighting Enterprise Products' strategy of leveraging mergers and acquisitions to establish a presence in areas with potential for future growth.
The firm anticipates long-term benefits for Enterprise Products, particularly in its downstream natural gas liquids (NGL) operations, as industry peers also signal growth prospects in the region.
Despite the current 'risk off' sentiment in the energy sector, Mizuho suggests that Enterprise Products could see an uptick in unit performance. The company's strong balance sheet, diversification, and the possibility of increased free cash flow in 2026—when capital expenditures are expected to decline—are factors that could contribute to this positive outlook.
Additionally, Mizuho has raised its estimates based on the Pinon acquisition and higher-than-anticipated contributions from petrochemical operations, as issues with the Propane Dehydrogenation (PDH) facility are resolved.
In other recent news, Enterprise Products Partners L.P. has announced a significant acquisition and robust financial results. The midstream energy services provider has agreed to purchase Piñon Midstream, LLC for $950 million, a move expected to enhance its presence in the Delaware Basin.
The acquisition includes natural gas pipelines, compressor stations, treating facilities, and two acid gas injection wells, with a third under consideration.
Enterprise has also reported a net income of $1.4 billion for Q2 2024 and a distribution of $0.525 per common unit. The company issued $2.5 billion in senior notes, consisting of $1.1 billion in 4.95% senior notes due 2035, and $1.4 billion in 5.55% senior notes maturing in 2055.
In addition to these financial milestones, Enterprise has earmarked $6.7 billion for growth projects focusing on processing plants, an NGL pipeline, and export expansions.
They have secured 100,000 barrels per day of new contracted commitments from the diluent open season on the TE product system. The company plans to continue targeting buybacks in the $200 million range until 2026, emphasizing its focus on organic growth and increasing export capacity.
InvestingPro Insights
In light of Mizuho Securities' positive outlook on Enterprise Products Partners L.P. (NYSE: EPD), recent InvestingPro data and tips provide additional insights into the company's financial health and market performance. With a robust market capitalization of $63.26 billion, Enterprise Products is trading at a price-to-earnings (P/E) ratio of 11.13, which is relatively low, indicating that the company's earnings could be undervalued in the market. The company's dividend yield stands at an appealing 7.2%, showcasing its commitment to returning value to shareholders, as reflected by its impressive track record of raising its dividend for 27 consecutive years—an InvestingPro Tip that aligns with the firm's strategy of steady growth and investor rewards.
Another InvestingPro Tip highlights that Enterprise Products is trading near its 52-week high, with the price being at 97% of this peak. This suggests that investor confidence in the company remains strong, particularly in the wake of its strategic acquisitions. Moreover, the company has shown a revenue growth of 5.08% over the last twelve months as of Q2 2024, which may support Mizuho's perspective on the company's potential for future growth. For those seeking further insights, InvestingPro offers numerous additional tips on Enterprise Products, providing a deeper dive into the company's performance and future prospects.
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