Both Enterprise Products Partners (NYSE:EPD) and MPLX (NYSE:MPLX) are blue-chip midstream MLPs (AMLP) that offer investors an attractive combination of safe and growing high-yield distributions, investment-grade balance sheets, and defensive business models that generate stable cash flows through a wide range of macroeconomics and energy industry environments. In this article, we compare them side-by-side and offer our take on which is the best buy right now.
EPD Stock Vs. MPLX Stock: Business Model
EPD and MPLX have distinctly different business models. EPD has a well-diversified and integrated model with a vast network covering major shale basins, while MPLX takes a more focused approach in just two segments. EPD’s diversification provides a hedge against sector-specific downturns and multiple growth avenues.
EPD’s interconnectivity of assets enables cost efficiencies and enhanced service offerings. On the other hand, MPLX’s close relationship with Marathon Petroleum Corporation (MPC) has benefits, but it also brings risks and potential conflicts of interest. We believe that EPD’s diversified approach offers better risk-reward than MPLX.
EPD Stock Vs. MPLX Stock: Balance Sheet Comparison
EPD’s balance sheet is convincingly stronger than MPLX’s, evidenced by its industry-leading A- credit rating compared to MPLX’s BBB rating. EPD’s impressive maturity calendar, liquidity, and conservative leverage ratio give it a considerably stronger balance sheet.
MPLX, meanwhile, generates significant free cash flow net of its distributions and has well-laddered debt maturities in the coming years. While both companies have strong balance sheets, EPD’s higher credit rating, liquidity, and lower leverage ratio give it a stronger financial position.
EPD’s leverage ratio stands at an impressive 3.0x, well below MPLX’s 3.5x, indicating conservative leverage levels that put both companies in strong financial shape.
EPD Stock Vs. MPLX Stock: Capital Allocation Strategy
EPD’s impressive track record of growing its distribution at a steady pace for each of the past twenty-five years is a testament to its prudent capital allocation strategy. MPLX, meanwhile, also has a very impressive distribution growth profile, with an 11-year growth streak. Both companies have also repurchased units over time, though MPLX has been more aggressive in this regard over the past three years.