Confirmed Buy Rating for Enterprise Products Partners

Josef Ray is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Figures seem to be stacking up right for North American provider of midstream energy services Enterprise Products Partners (NYSE: EPD). The Houston-based company, which owns and operates the natural gas liquids (NGLs) sector of Enterprise Products Company (EPCO), received a go signal from Deutsche Bank when the Germany-headquartered investment analysts issued a note to investors stating that the multinational firm has a “buy” rating. The target price increased from $60 to $62, and trading closed with a notable +.80%. Does this mean you should trade EPD? Read on.

Partnerships

The most recent earnings data released by Enterprise Products Partners last November stated that the company had a $0.66 EPS for the quarter; $0.06 more than what Thomson Reuters initially predicted. Although the company’s quarterly income dipped 7.6% lower based on an annual basis, overall, analysts are still quite optimistic that Enterprise Products Partners will merit at least $2.62 in profits per share for the current fiscal year, with stocks gaining almost fourteen percent. This comes after news that one of its subsidiaries will transport goods for another subsidiary, SeaRiver of ExxonMobil Corporation, for the latter’s United States operations for a yet unspecified number of years starting the first of January, 2013.

Zacks analysts are evidently in agreement as they confirmed a “buy” rating on the company’s shares. Investment analysts at Credit Suisse, meanwhile, are much more confident: they gave an “outperform” rating and even raised the target price on shares from $60 to $61.  This is possibly another positive result generated by news of its Seaway Pipeline joint venture with Enbridge, Incorporated and other smaller players; in addition to plans of a 580-mile-long NGL pipeline to be laid across the Lake Houston Wilderness Park.

Kinder Morgan

The numbers and ratings for rival company Kinder Morgan (NYSE: KMI) the world’s largest pipeline conglomerate, are a mixed bag. With a $39 target price, Zacks gave the energy transportation, storage, and distribution company, a neutral rating. An analyst of the said notable investment research firm reiterated that they are “maintaining long-term recommendation on Kinder Morgan at neutral, ahead of its fourth quarter results” which means that the company is likely to onto hold that slot in the near future. This is surprising, coming from Zacks, especially as KMI’s acquisition of El Paso Corporation contributed heavily to being named the biggest in terms of being a pipeline conglomerate. Furthermore, this acquisition also helped multiply the company’s fourth-quarter revenue to more than double of the previous year, in addition to the ever-present demand for natural gas. KMI even exceeded Zacks’ estimate of $0.67 by at least $0.08. Quarterly results were also higher by more than 36%, mainly due to the pipeline network’s expanded distribution. While Deutsche Bank posted a “buy” rating on the company with target price on shares from $45 to $48, The Street also confirmed a somewhat confusing “sell” rating for Kinder Morgan.

Energy Transfer Partners

US-based limited partnership Energy Transfer Partners (NYSE: ETP) looks just as poised to take the spotlight. For one thing, Deutsche Bank lifted its target price from $50 to $53 and released a “buy” rating for the company. Investment experts at Barclays Capital also have the same number, $53 on the target price, and an “overweight” rating on their report. Analysts at Zacks were more cautious, pegging the target price at $45 and giving the stock a “neutral” rating.  Bank of America, it seems, saw similarly; their analysts gave the company an increase in target price from $47 to $48, but kept their rating at “neutral.”  ETP and other midstream companies, however, still seem to be afloat due to the glut in transport opportunities such as those they provide. ETP and its upcoming merger with Regency Energy Partners in the next several months should also boost stock price and gains, with the concomitant increase in efficiency and reduction of capital costs. Quarterly distribution is also expected to grow larger this year with the company’s efforts to diversify finally coming to a head.

The Verdict

EPD’s announcement of its 2012 fourth-quarter earnings is yet to come on January 31, 2013 prior to the opening of NYSE trading. Currently trading at attractive levels, stock from this company is likely to be profitable for the current shareholder and potential trader alike, as equity capital cost was significantly reduced, in addition to other positive business developments.


JosefRayDagatan has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners L.P. and Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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