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Enterprise Products: Expected to Report Flat 1Q16 Earnings

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Flat EBITDA expectations

Enterprise Products Partners (EPD) is scheduled to report its 1Q16 earnings on April 28, 2016. Analysts expect the company’s quarterly EBITDA (earnings before interest, tax, depreciation, and amortization) to be $1.32 billion. That would be a slight decrease of 0.6% compared to $1.33 billion in 1Q15.

EPD’s 1Q16 estimated EBITDA is also lower than 4Q15. On April 11, 2016, the company increased its 1Q16 distributions by 1.3% to $0.40 per share, a 5.3% YoY (year-over-year) increase.

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The challenging commodity price environment has caused many midstream companies to announce flat distributions. Williams Companies (WMB) has announced a flat 1Q16 dividend per share compared to the previous quarter. Plains All American Pipeline (PAA) also announced flat 1Q16 distributions. Tallgrass Energy Partners (TEP) announced a 10.2% sequential increase in its 1Q16 distribution per share.

The above graph shows Enterprise Products Partners’ EBITDA and distribution per share over the last five quarters. It also shows expected EBITDA in 1Q16. EPD forms 10.5% of the Alerian MLP ETF (AMLP), which invests in the top energy MLPs.

EBITDA drivers in 1Q16

Volume declines in the Eagle Ford, Barnett, Rockies, and Bakken shales may impact EPD’s 1Q16 earnings. The company also expects muted volume growth in the Permian Basin and Appalachian region.

The following may contribute positively to EPD’s 1Q16 earnings:

  • final phase of the LPG (liquefied petroleum gas) export terminal on the Houston Ship Channel completed in December 2015
  • final segment of the Aegis Ethane pipeline completed in December 2015

EPD’s revenues, however, may decline year-over-year due to sustained low commodity prices in 1Q16. A decrease in revenues will not likely result in a decrease in EPD’s EBITDA. That’s because its cost of sales may also decrease due to comparable decreases in the purchase prices of underlying energy commodities.

Next, we’ll see Enterprise Products Partners’ expected segmental performance in 1Q16.

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