The companies operating in the Zacks Oil and Gas – Production Pipeline industry play a vital role in the energy ecosystem by facilitating the efficient transportation and storage of crude oil and natural gas to meet rising demand from the transportation, industrial and residential sectors. Beyond ensuring a stable and reliable energy supply, midstream infrastructure strengthens energy security, supports economic growth and provides essential feedstocks for petrochemical and fertilizer production. As global energy consumption continues to increase, midstream companies remain critical to meeting traditional energy needs while supporting the transition to cleaner technologies and lower-carbon energy solutions.
Two leading operators in the U.S. midstream sector are Enterprise Products Partners EPD and Energy Transfer LP ET. Their extensive pipeline networks provide a safe, efficient and cost-effective means of transporting crude oil, natural gas and refined products across long distances. This infrastructure helps ensure reliable deliveries to refineries, power plants and end users while offering a more economical and lower-risk alternative to transportation by rail or truck.
Energy Transfer operates a highly diversified midstream platform spanning crude oil, NGLs, refined products and natural gas pipelines, as well as storage and processing facilities. The company has a strong presence in the Permian Basin and operates the Dakota Access Pipeline. Energy Transfer’s interests in export terminals further enhance its scale and provide additional opportunities to generate cash flow. The company operates an extensive network of approximately 140,000 miles of pipelines.
Enterprise Products Partners offers a compelling investment case, supported by its extensive and strategically positioned pipeline network and diversified midstream asset base. Its broad infrastructure connects major supply basins with key demand centers, while a robust portfolio of growth projects supports expanding scale and improves cash flow visibility. This extensive network underpins stable, fee-based revenues and strengthens the company’s long-term resilience amid an evolving energy landscape. Enterprise Products Partners operates more than 50,000 miles of pipelines.
Growing U.S. hydrocarbon production and volumes continue to drive demand for midstream infrastructure and services. Against this backdrop, let’s take a closer look at the fundamentals of these two companies to determine which stock presents the more attractive investment opportunity at present.
ET & EPD’s Earnings Growth Projections
The Zacks Consensus Estimate for Energy Transfer’s 2026 and 2027 earnings has moved up 4.38% and 4.79%, respectively, in the past 60 days.
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The same for Enterprise Products Partners’ 2026 earnings has decreased 0.34% in the past 60 days and for 2027 earnings improved 0.3% in the same time period.
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Return on Equity
Return on Equity (“ROE”) is an important measure of financial performance that indicates how efficiently a company converts shareholder equity into profits. It highlights management’s effectiveness in utilizing invested capital to grow earnings and enhance shareholder value.
ET’s current ROE is 9.77% compared with EPD’s 19.53%.
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EPD and ET’s Cash Distribution
Midstream companies typically generate strong and relatively stable cash flows, supported largely by fee-based contracts and regulated tariffs that account for a significant share of their revenues. Both firms return a substantial portion of their cash flows to unitholders through regular cash distributions.
Enterprise Products Partners currently offers a cash distribution yield of 5.67% and has increased its distribution 10 times over the past five years. Its average annual distribution growth over the same period stands at 4.61%.
Energy Transfer offers a higher current cash distribution yield of 6.66% and has raised its distribution 18 times over the past five years. The partnership has achieved an average annual distribution growth rate of 16.58% during this period.
Valuation
Enterprise Products Partners’ units are trading at a discount. EPD’s current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) is 11.66X, compared with the industry’s 12.15X.
Energy Transfer is trading at an EV/EBITDA of 10.28X, at a discount compared with its industry. This indicates that the firm is presently undervalued compared with its industry peers.
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Price Performance
Enterprise Products Partners’ units have gained 1.9% in the past three months compared with Energy Transfer’s rally of 5.8%.
Price Performance (Three months)
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Summing Up
Enterprise Products Partners and Energy Transfer provide efficient midstream services across their key operating regions, supported by extensive infrastructure and strong exposure to the highly productive Permian Basin. Rising U.S. hydrocarbon production is driving increased demand for transportation, processing and storage services, creating additional growth opportunities for both midstream companies.
Energy Transfer shows promise with a discounted valuation, better earnings estimate revision, stronger unit price performance and broader pipeline operations in the United States compared with Enterprise Products Partners.
Based on the above factors, it can be said that Energy Transfer, currently sporting a Zacks Rank #1 (Strong Buy), has an edge over Enterprise Products Partners, which has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank stocks here.
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Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).