Jim Cramer sees Enterprise Products Partners L.P. (NYSE:EPD) as a major beneficiary of the disruption surrounding the Strait of Hormuz, as he said during the September 8 episode of Mad Money:
When I wrote How to Make Money in Any Market… I didn’t know that Enterprise Products Partners was going to be the, maybe the single biggest pipeline winner in this country thanks to the war. I didn’t see that war coming. The CEO of Enterprise, Jim Teague, has raised awareness for the company’s profit opportunity because of the Hormuz closing. The margins of some of its liquids, like ethane to ethylene, ethylene to polyethylene, have soared. As Teague says, the Houston Ship Channel is now just as important as the Strait of Hormuz. Now, there’s an endorsement. Stock yields 5.8%.
EPD’s Record Q2 Results Strengthen the Case
Enterprise Products Partners L.P. reported record second-quarter adjusted EBITDA of $2.8 billion, up 17% year over year, while operational distributable cash flow reached a record $2.3 billion, up 21%. Moreover, pipeline volumes reached a record 14.7 million barrels of oil equivalent per day, up 8%, while marine-terminal volumes increased 33% to 2.8 million barrels per day. Co-Chief Executive Officer James Teague said:
Volumes at our marine terminals have returned to normal levels in June and July after the initial rush to backfill volumes affected by hostilities in the Middle East in April and May.
EPD’s 5.8% Yield Keeps the Income Case in Focus
In July, Enterprise Products Partners L.P. declared a quarterly distribution of $0.56 per unit, or $2.24 annualized, a 2.8% increase from a year earlier. At EPD’s September 8 closing price of $38.83, that equates to a yield of approximately 5.8%. The company has increased its distribution for 27 consecutive years. The company’s latest investor materials show $6.5 billion of major capital projects under construction. It expects 2026 organic growth capital spending, net of asset-sale proceeds, of $2.9 billion to $3.4 billion. The company retained $1.1 billion of DCF for internally funded growth capital expenditures and buybacks.
EPD Faces Margin and Capital-Spending Risks
Enterprise Products Partners L.P.’s businesses remain exposed to volumes, spreads and demand across NGLs, petrochemicals and exports, while the company’s recent results included unusually strong market conditions. The capital program is another consideration. The company expects billions of dollars of growth spending while it has $6.5 billion of major projects under construction. The spending is intended to expand infrastructure, but it also means a larger portion of cash flow needs to be committed to projects before investors see the full benefit.
EPD Hedge Fund Holdings Stay Flat as Short Interest Remains Low
Insider Monkey tracks more than 1,000 hedge funds, and in Q2, 32 hedge funds held EPD, unchanged from 32 in Q1. Recent market data put EPD short interest at approximately 1.3%-1.4% of the float. Enterprise Products Partners L.P.’s second-quarter results, distribution, and capital program provide the latest operating and financial data behind Cramer’s comments, while Teague’s statement shows that marine-terminal volumes had already returned to normal levels by June and July.
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