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Prediction: 1 High-Yield Stock That Will Be Worth More Than UPS 2 Years From Now
The Motley Fool· 2025-04-24 12:15
Core Viewpoint - UPS has experienced significant stock decline and operational challenges, while Enterprise Products Partners presents a more stable investment opportunity with strong growth potential and high dividend yield [1][2][7]. UPS Overview - UPS operates in over 200 countries, delivering an average of 22.4 million packages daily and employing nearly half a million people [1]. - The company has been a member of the S&P 500 for 23 years and has raised its dividend annually for 16 consecutive years [1]. Recent Performance of UPS - Over the past two years, UPS's stock has plummeted by more than 50% due to decelerating deliveries, shrinking operating margins, and declining EPS [2]. - In 2023, UPS's revenue declined by 9%, adjusted operating margin shrank by 290 basis points to 10.9%, and EPS plunged by 41% [4]. - For 2024, revenue growth flatlined, adjusted operating margin dropped another 90 basis points to 9.8%, and EPS fell by 13% [4]. Future Projections for UPS - From 2024 to 2027, analysts expect UPS's revenue to grow at a compound annual growth rate (CAGR) of less than 1%, while EPS is projected to grow at a CAGR of 11% [5]. - If UPS matches analysts' estimates and trades at 13 times forward earnings by the beginning of 2027, its stock price could rise about 23% to $119, driving its market cap to just over $100 billion [6]. Enterprise Products Partners Overview - Enterprise Products Partners builds pipelines for transporting natural gas, natural gas liquids, and crude oil, operating over 50,000 miles of pipeline across the U.S. with a combined storage capacity of over 300 million barrels of oil [8]. - As a midstream company, Enterprise generates revenue by charging upstream extraction and downstream refining companies "tolls" to use its pipelines, making it less affected by fluctuating fuel prices [9]. Growth Potential of Enterprise Products Partners - Enterprise is well-insulated from inflation and macro headwinds, benefiting from the Trump Administration's promotion of domestic fossil fuels [10]. - The company is a master limited partnership (MLP), reporting profits in earnings per unit (EPU) and returning most of its EPU to investors as distributions [11]. - From 2014 to 2024, Enterprise's EPU grew at a steady CAGR of 6%, with a current forward distribution of $2.14 per share, equating to a forward yield of 6.9% [12]. Future Projections for Enterprise Products Partners - Analysts expect Enterprise's EPU to continue growing at a CAGR of 6% from 2024 to 2027, driven by pipeline expansions in oil-rich locations [12]. - At $31, Enterprise trades at just 11 times this year's EPU estimate, and if it trades at 15 times forward earnings by Q1 2027, its stock price could rise 53% to nearly $48, boosting its market cap to $102.5 billion [13].
South Bow Safely Restarts Keystone Pipeline
Newsfilter· 2025-04-16 11:30
Core Viewpoint - South Bow Corp. has successfully restarted the Keystone Pipeline after receiving regulatory approval following an oil release incident on April 8, 2025, near Fort Ransom, North Dakota [1][3]. Group 1: Incident Response and Recovery - South Bow has repaired and replaced the affected pipeline section and has recovered most of the estimated 3,500 barrels of oil released, focusing on soil remediation [2]. - The company is committed to the safety of personnel and minimizing environmental risks, with continuous air quality monitoring showing no adverse health concerns [2]. - A Corrective Action Order was issued by PHMSA on April 11, 2025, requiring South Bow to implement specific corrective actions, which included a restart plan that has been approved [3]. Group 2: Regulatory Compliance and Operations - The Keystone Pipeline is now operating under certain pressure restrictions as mandated by PHMSA, and South Bow has also informed the Canada Energy Regulator about similar restrictions on the Canadian sections of the pipeline [3]. - The pipeline was operating within its design and regulatory approval requirements at the time of the incident [3]. - South Bow is actively engaging with regulators, local officials, landowners, and the community during the recovery process [2][3]. Group 3: Communication and Updates - South Bow will continue to provide updates regarding the incident and recovery efforts on its website [4].
South Bow Corporation(SOBO) - 2024 Q4 - Earnings Call Transcript
2025-03-06 18:16
Financial Data and Key Metrics Changes - South Bow generated normalized EBITDA of $1.09 billion and distributable cash flow of $608 million in 2024 [13] - The company expects to generate normalized EBITDA of $1.01 billion in 2025, reflecting a range of 3% [15] - The net debt to normalized EBITDA ratio is forecasted to be approximately 4.8% by the end of 2025 [16] Business Line Data and Key Metrics Changes - 90% of normalized EBITDA is secured through committed arrangements, minimizing commodity price or volumetric risk [14] - The marketing segment is expected to see a reduction of approximately $30 million year-over-year due to reduced activity and certain unwinds of positions [99] Market Data and Key Metrics Changes - There is significant demand for uncommitted capacity on Keystone and continued strength in demand for capacity on the U.S. Gulf Coast segment [14] - The company has observed extreme demand in the Gulf Coast for heavy barrels out of Canada, indicating strong supply and demand fundamentals [24] Company Strategy and Development Direction - South Bow aims to leverage existing infrastructure to deliver high returns for shareholders, with a focus on capital allocation priorities and risk management [10] - The company is committed to maintaining a sustainable dividend while strengthening its investment-grade financial position [10][17] - Future growth will be pursued within risk preferences, with a focus on optimizing existing corridors and enhancing contracted strategies [12][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong financial position entering 2025 and the ability to meet near-term deleveraging targets [16] - The ongoing uncertainty around tariffs may create headwinds for uncommitted capacity, but the company believes it can manage risks within its guidance [29] Other Important Information - The company received approval from PHMSA to lift pressure restrictions on a segment of the Keystone system, which is expected to improve operational efficiency [96] - The variable toll complaint process is ongoing, with decisions awaited from both Canadian and U.S. regulatory bodies [78] Q&A Session Summary Question: Discussion on open season and interest levels - Management noted that Western Canadian sedimentary basin has been egress constrained for years, but there is encouragement from both supply and demand fundamentals [22][24] Question: Changes in long-term debt-to-EBITDA target - Management confirmed a focus on deleveraging to reach a target of four times by 2028, emphasizing the importance of maintaining a strong balance sheet [26] Question: Guidance on tariffs and downside risks - Management indicated that 90% of EBITDA is contracted, allowing for stability despite market uncertainties, and they believe they can manage risks within a 3% range [28][29] Question: Future growth opportunities and recapitalized optionality - Management highlighted the importance of leveraging existing infrastructure and optimizing capital investments to support growth [39][40] Question: Marketing strategy and market conditions - Management is shifting towards a more contracted marketing strategy to mitigate volatility and improve shareholder value [71][106] Question: PHMSA approval impact on capacity - Management stated that the approval will enhance operational efficiency but did not provide specific throughput increases at this time [97] Question: Long-term EBITDA growth outlook - Management expressed confidence in achieving a 2% to 3% growth rate, driven by increased delivery points and capturing additional volumes [87][106]