UPDATE: Morgan Stanley Downgrades Enterprise Products Partners (EPD) to Equalweight

(Updated - January 7, 2022 4:50 AM EST)

Morgan Stanley analyst Robert Kad downgraded Enterprise Products Partners (NYSE: EPD) from Overweight to Equalweight with a price target of $27.00 (from $29.00).

The analyst comments "EPD screens attractively from a valuation perspective, but more limited incremental return of capital in the form of buybacks appears likely to favor outperformance elsewhere. EPD has generally appeared to favor an approach focused on distribution growth and capital investment (a deck published in November outlined priorities for cash — (1) distribution growth, (2) capital projects, (3) balance sheet fortification, (4) unit buybacks). There has been a great deal of investor discussion around this relative preference and we would characterize the majority of investors (a broad cross section of generalist and dedicated, long and long/short) as having expressed a predisposition for greater buybacks. The sensitivity in many of these conversations is that buybacks are perhaps increasingly necessary to re-rate dislocated valuations, particularly for MLPs that suffer from narrow index inclusion/passive fund flows and a more limited institutional investor base. Distribution growth, in this argument, offers tax advantages on the margin but more limited support for stock performance given sector volatility and distribution cuts that have broadly discouraged yield-oriented investor participation. While we see merit to EPD's capital investment approach (particularly around the competitive advantages it enjoys within its petchem footprint) and a track record of distribution security that we believe are both underappreciated, it also is reasonable to question whether that strategy is sufficient to support outperformance."

For an analyst ratings summary and ratings history on Enterprise Products Partners click here. For more ratings news on Enterprise Products Partners click here.

Shares of Enterprise Products Partners closed at $23.27 yesterday.

You May Also Be Interested In

• CFRA Downgrades Rentokil Initial Plc. (RTO:LN) (RTO) to Hold
• Parker-Hannifin (PH) PT Raised to $520 at TD Cowen
• JPMorgan Upgrades Banco BPM SpA (BAMI:IM) (BNCZF) to Neutral