Enterprise Products Partners LP (EPD)

[ranchhand71]

Morningstar $25 target:
Enterprise's first-quarter results broadly met our expectations, and we will hold our $25.50 fair value
estimate and wide moat rating intact while we incorporate these results into our model. Winter storm
Uri contributed an estimated $250 million in net gross operating margin, as similar to peers, Enterprise
was able to benefit from selling natural gas out of storage, but some of these profits were offset by lost
volumes from assets that were shutdown. Stripping out the Uri benefit, which we see as one-time in
nature and not material enough to move our fair value estimate, results were close to flat, as Enterprise
expects more of a recovery in 2022 and 2023 as U.S. volumes pick up with the economy's re-opening. At
this stage, volumes still remain well below last year's levels across Enterprise's portfolio, though Uri
certainly contributed. Overall gross operating margin was $2.3 billion compared with $2 billion last year,
and the partnership generated over $350 million in free cash flow after capital spending and
distributions. Enterprise also disclosed that it has been studying energy "evolution" opportunities across
hydrogen, carbon capture, and plastics recycling for the past two years. The effort is organizationwide--
more specifically, hydrogen transportation and storage, carbon capture, and storing and upgrading the
byproducts of recycled plastics. We agree with this approach as we expect it to yield new investment
opportunities, and as Enterprise also pointed out, leads to a natural extension of its overall value chain