One does rather tire of these cyclical businesses, don’t you think? Enterprise Products Partners, that purveyor of hydrocarbons, has been experiencing a bit of a wobble – a temporary inconvenience, naturally – due to some rather uninspired contract arrangements in their LPG division. Apparently, 2025 was something of a bother. But, good news, darling! They seem to have righted the ship, and are projecting a return to something resembling growth by 2027. One hopes it’s not too strenuous.
A Spot of Resilience
Despite the recent… challenges, Enterprise operates with a certain dependable dullness. A staggering 82% of their gross operating profit in 2025 stemmed from fee-based activities – back to the reliably unexciting levels of yesteryear. One assumes they haven’t been attempting anything terribly ambitious.
In the fourth quarter, gross operating profit rose a perfectly acceptable 4% to $2.74 billion. Adjusted EBITDA, likewise, managed a 4% uptick to $2.71 billion. Distributable cash flow, at $2.22 billion, was also modestly improved. Though, let’s be honest, $1.17 billion in free cash flow is hardly cause for popping champagne.
The master limited partnership currently offers a forward yield of 6.4% – a respectable figure, if one is that way inclined. They’ve been remarkably consistent with their dividends, which is more than one can say for most things these days. A conservative, shareholder-friendly nature, they claim. One suspects it’s simply a lack of imagination.
Despite the aforementioned lackluster 2025, their distribution remained comfortably covered, and their balance sheet remains… adequate. A coverage ratio of 1.8x, based on DCF, and leverage of 3.3 times. They even managed to repurchase $50 million in stock, which, while hardly extravagant, is a gesture. A quarterly distribution of $0.55 per unit, up 2.8% year-over-year. Perfectly predictable, really.
Looking ahead, they forecast adjusted EBITDA and cash flow to grow at the lower end of their 3% to 5% target range in 2026. But, 2027 promises double-digit growth as new projects come online. They’ve also lowered their capital expenditure budget to a range of $2.5 to $2.9 billion, down from $4.4 billion in 2025. Which means they might have around $1 billion in discretionary free cash flow in 2026. One can only hope they don’t squander it.
A Calculated Risk?
After a rather uninspiring 2025, Enterprise appears to be in a slightly better position heading into 2026. Reduced capital expenditure will provide them with some flexibility – allowing them to pay down debt, buy back shares, or, heaven forbid, make strategic acquisitions. Meanwhile, their distribution remains well covered, and they’re aiming for a 28th consecutive year of payout increases. One applauds the dedication to monotony.
With growth projected to accelerate in 2027, now might be a reasonable time to acquire the stock. Though, one wouldn’t advise placing all one’s eggs in a single hydrocarbon basket. Still, a modest recovery, wouldn’t you agree?
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2026-02-08 15:52