During the episode aired on September 28, Jim Cramer highlighted Enterprise Products Partners L.P. (NYSE: EPD), discussing the infrastructure disruptions in the Gulf and their impact. He praised the company’s nat-gas liquids business for excelling amid these challenges. Earlier in September, he had also highlighted EPD positively in his work “How to Make Money in Any Market.”
### Robust Cash Flows and Fee-Based Resilience
The bullish case for EPD is bolstered by its strong financial results, including a 28% increase in net income to $1.84 billion, significantly exceeding Wall Street’s expectations. Revenue rose 61% to $18.27 billion, while adjusted EBITDA reached $2.83 billion, supported by volume growth across its processing and pipeline network. Additionally, EPD reported a record $2.5 billion in adjusted cash flow, benefiting from its fractionators and export terminals. Unlike upstream drillers that are vulnerable to commodity price fluctuations, EPD’s fee-based revenue structure ensures consistent cash flow, supporting its expansion plans.
### Capital Intensity and Commodity Market Exposure
However, investing in EPD carries certain risks inherent to the midstream energy sector. The company operates in a capital-intensive environment, with expected growth capital expenditures between $2.9 billion and $3.4 billion by 2026. Maintaining these expenditures requires continuous access to capital markets, exposing EPD to economic fluctuations. While fee-based contracts mitigate direct commodity price impacts, its volume throughput is still tied to upstream production in key areas like the Permian Basin. A slowdown in domestic drilling or regulatory challenges could compress margins and affect cash flows.
### Institutional Ownership and Conservative Short Interest
Insider Monkey’s data indicates consistent institutional support for EPD, with 32 hedge funds holding shares over recent quarters. Fairholme (FAIRX) is among the largest stakeholders. Short interest remains low at 2.40% of the public float, which may provide a buffer against broader market volatility. EPD’s forward earnings multiple of 11.9x aligns with its sector median, though it is lower than peers such as Energy Transfer LP and Kinder Morgan, indicating relative value.
Despite EPD’s potential, some investors might find greater upside in specific AI stocks, given their current valuations and the ongoing trends in onshoring.
For more insights, check out the report on undervalued AI stocks that could benefit from market shifts.
