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Enterprise Products (EPD) Q4 Earnings: Is a Beat in Store?

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Enterprise Products Partners L.P.EPD is likely to beat expectations when it reports fourth-quarter 2016 results on Jan 30, before the opening bell. In the preceding quarter, the partnership's earnings were in line with the Zacks consensus estimate making the earnings ESP stand at 0.00%. EnterprisesProducts Partners L.Phas underperformed the Zacks Consensus Estimate in the preceding four quarters with an average negative surprise of 2.44%.

Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Enterprise Products Partners L.P.is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +6.25%. This favorable Zacks ESP serves as a meaningful and a leading indicator of a likely positive earnings surprise for units.You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Enterprise Products Partners L.P. carries a Zacks Rank #3 (Hold) which, when combined with a positive Earnings ESP, makes us confident about a positive earnings beat.

Please note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

What is driving the Better-Than-Expected Earnings?

Enterprise Products Partners L.P. is a major midstream energy player providing processing and transportation services to the producers and consumers of natural gas, crude oil, petrochemicals and refined products in North America.

With the fourth quarter being extremely encouraging for the energy sector, as OPEC agreed modest oil output curbs for the first time since 2008, the entire sector is extremely optimistic about the oil price recovery. The price of crude improved significantly post the development. In fact, the commodity traded mostly above $50 per barrel mark during last month of the quarter. Also, the price of natural gas was above the psychological mark of $3 per MMBtu owing to forecast of colder weather. The improvement in commodity prices was definitely favorable for exploration and production companies and might led them to produce more of the commodities.

We believe that increased production will be lead to higher need for transportation and storage activities. This, in turn, could generate significant cash flows for midstream players.

The stock has showed strong pricing strength in the last three months. During the aforesaid period, the units of Enterprise Products Partners gained 8.5% compared with 4.7% improvement for the Zacks categorized industry.

The stock has showed strong pricing strength in the last three months. During the aforesaid period, the units of Enterprise Products Partners gained 8.5% compared with 4.7% improvement for the Zacks categorized Oil/Gas Production Pipeline MLP industry.

Moreover, the company's enterprise value of $80 billion, greater diversification across several commodities, low leverage and healthy distribution coverage ratios make us confident about its strong financials.

Other Stocks to Consider

Other stocks in the energy sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Enable Midstream Partners, LP ENBL has an Earnings ESP of +11.77% and Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Summit Midstream Partners, L.P. SMLP has an Earnings ESP of +76.47% and a Zacks Rank #3.

Plains All American Pipeline, L.P. PAA has an Earnings ESP of +26.53% and a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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