Enterprise Products Partners Looks to Keep Growing

On Tuesday, Enterprise Products Partners (EPD -0.88%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

With all the energy-production activity in the U.S., higher volumes have strained the capacity of the existing network of pipelines that deliver energy products to refiners and end markets. For Enterprise Products Partners, that represents a huge growth opportunity. Let's take an early look at what's been happening with Enterprise Products Partners over the past quarter and what we're likely to see in its quarterly report.

Stats on Enterprise Products Partners

Source: Yahoo! Finance.

Can Enterprise Products Partners keep investors happy this quarter?
Analysts have gotten more optimistic about Enterprise Products Partners and its earnings prospects in recent months, pushing their first-quarter earnings estimates up by $0.03 per share and raising their calls for full-year 2013 earnings by twice that amount. The stock has responded favorably, rising more than 12% since late January.

The need for more energy infrastructure in the U.S. has become much greater in recent years, given booms in production in areas across the country. Through its Seaway pipeline joint venture with Enbridge (ENB -0.70%), Enterprise controls a key link between the Gulf Coast's major refining hub and the pipeline-network hub in Cushing, a small town between Oklahoma City and Tulsa.

Of course, Enterprise isn't the only player in the space. Midstream giant Kinder Morgan Energy Partners (NYSE: KMP) has been pushing hard to extend its lead in the industry, with its recent purchase of Copano Energy giving Kinder Morgan both pipeline and processing-facility assets in the important Eagle Ford shale play in South Texas.

But one largely unknown yet important focus area that Enterprise has thrived in is the natural gas liquids space. As dry-gas prices fell, many producers looked to boost their NGL output because of its more lucrative pricing. Enterprise has a huge NGL infrastructure that includes fractionators, import and export terminals, and a pipeline network that connects to most of the nation's production facilities for ethylene, which is a necessary component for producing vital plastics and other chemicals.

Still, Enterprise could face a big threat from lawmakers in Washington. The master limited partnership tax structure that Enterprise and many other midstream producers use has exploded in popularity, with many companies seeking to create nontraditional MLPs. Overusing the MLP tax benefit could lead Congress to take it away even for legitimate users like Enterprise that have clearly done exactly what the law intended to encourage.

In Enterprise's earnings report, focus on comments from management about where the company's best prospects for future growth are. With advantages like not having to pay incentive distributions to general partners, Enterprise unitholders can reap the full benefit of growth opportunities in the industry.

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