Enterprise Products Partners: Is the Stock a Buy as Growth Is Set to Ramp Up in 2026?

Enterprise Products Partners (EPD) is navigating near-term headwinds from expiring LPG contracts and normalized chemical spreads, which contributed to a Q3 decline in gross operating profit and EBITDA. Despite this, the midstream MLP maintains a stable, fee-based business with a well-covered 7.1% forward distribution yield and a solid balance sheet. The company is poised for stronger growth in 2026 as $5.1 billion in major projects, including Frac 14 and new pipelines, come online, and capital expenditures normalize after peaking this year. EPD recently increased its stock buyback authorization to $5 billion, signaling enhanced capital allocation flexibility, and its current valuation of 9.5x forward EV/EBITDA is considered attractive ahead of anticipated operational improvements.

Analysis

Enterprise Products Partners (EPD) faced near-term headwinds in Q3, with gross operating profit declining 3% to $2.39 billion and adjusted EBITDA falling 1.5% to $2.41 billion. These declines were primarily due to the expiration of long-term LPG contracts and the normalization of spreads in its chemical businesses. Despite this, the company's business model remains stable, with over 82% of gross operating profits derived from fee-based activities, aligning with historical levels.

EPD demonstrates robust financial health, maintaining a 1.5x distributable cash flow (DCF) coverage ratio and a leverage of 3.3x at quarter-end. The company increased its quarterly distribution by 3.8% year-over-year to $0.545 per unit, extending its streak of consecutive increases to 26 years. Furthermore, EPD significantly expanded its stock buyback authorization from $2 billion to $5 billion, indicating enhanced capital allocation flexibility while prioritizing distribution growth.

The company is poised for stronger operational performance in 2026, with $5.1 billion in growth projects under construction, including the recently operational Frac 14 NGL fractionator and upcoming Bahia and Seminole pipeline conversions. Capital expenditures are projected to normalize to $2.2-$2.5 billion in 2026 after peaking at $4.5 billion this year, which is expected to free up capital for debt reduction and increased shareholder returns. EPD currently trades at an attractive 9.5x forward EV/EBITDA based on 2026 estimates, presenting a valuation below its historical multiple.

Key Decisions for Investors

• Consider EPD for its attractive 7.1% forward yield and robust capital return policy, supported by a recent increase in buyback authorization and consistent distribution growth.
• Monitor the successful commissioning and ramp-up of new growth projects, particularly the Frac 14 NGL fractionator and pipeline conversions, as these are critical for anticipated 2026 operational improvements.
• Evaluate the company's valuation at 9.5x forward EV/EBITDA as a potential entry point, given its historical trading multiples and the expected stronger operational performance and capital flexibility post-2025 capex cycle.