Enterprise Products Partners LP (EPD – Analyst Report) carried its momentum into the third quarter and delivered another solid earnings surprise.

Analysts have been raising their estimates off the strong quarter, sending the stock to a Zacks #2 Rank (Buy).

Its distribution has been rising too, with the partnership recently raising it for the 29th consecutive quarter. It currently yields a stellar 5.4%.

Master Limited Partnership

Enterprise Products Partners is a Master Limited Partnership (MLP) operating in the natural gas and crude oil pipeline industry. With over 50,000 miles of pipelines and a market cap of $39.5 billion, it is the largest publicly traded energy partnership. It is headquartered in Houston, Texas.

Third Quarter Results

Enterprise reported another quarter of outperformance on November 2. Earnings per unit came in at 55 cents, beating the Zacks Consensus Estimate by 5 cents. It was up over 200% from the same quarter in 2010.

The gross operating margin rose 20% year-over-year to $973 million driven by a 38% jump in NGL pipelines amp; services. Operating income jumped 25% as the company leveraged its fixed costs.

Enterprise also reported record distributable cash flow of $856 million for the quarter, which provided an ample 1.7 times
coverage of its cash distribution to unitholders.

Income

Enterprise recently raised its cash distribution, marking the 29th consecutive quarterly increase. Since 2000, Enterprise has increased it at an average annual rate of 8%:

It currently yields a juicy 5.4%, much better than the 2.0% youd get on a 10-year Treasury note right now.

Growth

Following better than expected Q3 earnings, analysts raised their estimates for both 2011 and 2012, sending the stock to a Zacks #2 Rank (Buy). As you can see in the Price amp; Consensus chart, estimates have been consistently rising over the last several months as Enterprise has delivered 8 consecutive positive earnings surprises:

Based on current consensus estimates, analysts are projecting 50% earnings per unit growth this year and 10% growth next year.

Valuation

The valuation picture looks reasonable for EPD. The stock trades at 19.8x 12-month forward earnings, in-line with the industry average and a discount to its 10-year median of 21.0x.

The Bottom Line

With solid earnings momentum, strong growth projections, a juicy 5.4% yield and reasonable valuation, Enterprise Products Partners still offers attractive total return potential.

Read the October 12 article here.

This Weeks Growth amp; Income Zacks Rank Buy Stocks:

Genesis Energy, LP (GEL – Snapshot Report) has raised its quarterly distribution 25 times in a row, and it currently yields a juicy 6.5%. Earnings estimates have been rising too after the company delivered better than expected results for the third quarter of 2011. It is a Zacks #1 Rank (Strong Buy) stock. Read the full article.

Parker Hannifin Corporation (PH – Analyst Report) recently reported record sales and earnings for the first quarter of its fiscal 2012. Management also raised its guidance for 2012, prompting analysts to revise their estimates higher too, and sending the stock to a Zacks #2 Rank (Buy). The company also pays a dividend that yields a solid 1.7%. Valuation looks attractive too with shares trading at just 11x forward earnings. Read the full article.

Penske Automotive Group, Inc. (PAG – Analyst Report) reported record results for its fiscal third quarter on November 2. Analysts expect this strong earnings growth to continue for the remainder of 2011 and carry into 2012. Penske also offers investors a dividend that yields 1.8%. Valuation looks attractive too with shares trading well below the industry average and sporting a PEG ratio of 0.7. Read the full article.

Oritani Financial Corp. (ORIT – Snapshot Report) continues to focus on growing its loan portfolio while maintaining solid credit quality, which should continue to drive EPS higher over the next several years. This was on display in Q3, where the company delivered a solid earnings beat on strong loan growth and margin expansion. ORIT also continues to return value to shareholders through aggressive stock buybacks and dividend hikes. It currently yields 3.8%. Read the full article.

Todd Bunton is the Growth amp; Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

Read the full analyst report on EPD

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Categories : Enterprise