4 Oil Pipeline Stocks to Gain From the Prospering Industry

Industry Overview - The Zacks Oil and Gas - Production & Pipelines industry consists of companies that own and operate midstream energy infrastructure, including extensive pipeline networks for transporting crude oil, liquids, and natural gas [2] - Companies in this sector are also involved in processing and storing natural gas, with some investing in renewable energy projects such as wind, solar, geothermal, and hydroelectric facilities [2] Market Dynamics - The demand for pipeline transportation is expected to improve as oil prices exceed $80 per barrel, encouraging upstream activities and increasing production [3] - Midstream businesses benefit from stable fee-based revenues due to long-term contracts with shippers, making them less vulnerable to commodity price volatility [3] Financial Performance - Many pipeline companies have a significant backlog of growth projects valued in billions, which will secure additional cash flows in the coming years [4] - The industry has been providing attractive dividend yields, outperforming the overall energy sector in terms of shareholder returns [4] Industry Ranking - The Zacks Oil and Gas - Production & Pipelines industry holds a Zacks Industry Rank of 29, placing it in the top 12% of over 250 Zacks industries, indicating positive near-term prospects [5] - The industry's favorable ranking is supported by a positive earnings outlook for its constituent stocks [5] Recent Performance - Over the past year, the industry has underperformed compared to the broader Zacks Oil - Energy sector and the S&P 500, with a 10.2% increase versus 11.7% and 24.3% respectively [6][7] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/EBITDA of 12.05X, which is lower than the S&P 500's 14.59X but higher than the sector's 3.01X [8] - Historical trading ranges for the industry over the past five years have been between 8.67X and 14.81X, with a median of 12.40X [8] Key Companies - Kinder Morgan, Inc. (KMI): A leading energy infrastructure company with 83,000 miles of pipeline networks, primarily generating stable fee-based revenues from take-or-pay contracts [11] - The Williams Companies Inc (WMB): Engaged in transporting and processing natural gas, with a pipeline network of over 30,000 miles, meeting 30% of the U.S. natural gas consumption [13] - MPLX LP (MPLX): Operates midstream energy infrastructure with stable cash flows and lower exposure to commodity price volatility, currently holding a Zacks Rank of 1 (Strong Buy) [15][16] - Ultrapar Participações SA (UGP): A major distributor of liquefied petroleum gas in Brazil, with a stable business model and a Zacks Rank of 1 [18]