This analysis reiterates a strong bullish outlook on Western Midstream Partners (WES), emphasizing that the underlying growth narrative remains compelling. The previous bullish call in April yielded impressive returns, yet the forward-looking prospects continue to be robust. While the market's re-evaluation of Enterprise Products Partners (EPD) appears to be largely finalized, the anticipated growth of Western Midstream's core business is poised to drive future shareholder value. Investors should anticipate continued upside driven by operational expansion rather than further multiple adjustments.

In a prior assessment from April, Western Midstream Partners received a 'Strong Buy' recommendation. This was based on an attractive yield and a valuation that presented considerable upside within the midstream energy sector. Since that recommendation, the investment has indeed performed well, delivering approximately 25% in returns, validating the initial thesis.

A critical aspect of the current investment landscape is the re-rating of Enterprise Products Partners (EPD), which has largely run its course. Consequently, future gains for WES are expected to be primarily influenced by a projected 7-8% growth in EBITDA, rather than continued expansion of its valuation multiple. This growth trajectory alone is sufficient to support an estimated 15% return, even if the multiple remains constant.

The current distribution yield of approximately 7.6% primarily appeals to new investors seeking income. However, the most significant long-term upside for WES lies in its developing water infrastructure business. This segment offers substantial optionality and could potentially lead to WES achieving a valuation multiple that surpasses even that of EPD. While this potential is recognized, it is not yet fully incorporated into the current conservative projections.

The sustained strength of Western Midstream's operational performance and strategic initiatives, particularly in its water services, underpins the continued confidence in its investment potential. The focus now shifts from market re-evaluations to the tangible growth generated by its business segments, promising continued value creation for shareholders.