Units of Magellan Midstream Partners L.P. (MMP) hit a 52-week high of $73.74 on Thursday, March 1. In fact, the oil pipeline and storage partnership has seen its unit price climb more than 20% since the beginning of October last year.
Despite this price appreciation, we remain optimistic on the firm’s near-term prospects, supported by consistency in its earnings/cash flows, attractive fundamentals and a positive outlook. The turnaround in fuel prices amid recent optimism about economic recovery has added to this bullishness. These factors are reflected in Magellan Midstream’s Zacks #2 Rank, which translates into a short-term Buy rating.
Magellan Midstream Partners owns a high-quality and diverse portfolio of midstream assets that generate stable and recurring revenues by way of long-term fee-based contracts. We also appreciate Magellan’s low cost of capital and strong distribution coverage. Over the last few years, the partnership has consolidated its position in the midstream business, achieved through a combination of organic efforts and accretive acquisitions.
In particular, following Magellan’s acquisition of petroleum storage and pipelines from a subsidiary of British major BP Plc (BP) in 2010, the infrastructure asset provider owns one of the largest crude oil storages in the Cushing region while continuing to exploit opportunities necessary for improving the utilization of these assets.
Magellan has also established a track record of consistent distribution growth – its current quarterly distribution of 81.5 cents per unit ($3.26 per unit annualized) is up by 210% since its initial public offering (IPO) at the beginning of 2001.
Overall, the partnership – with more than $500 million of potential projects under development – has an attractive growth potential, and maintains a sound liquidity position.
As such, we believe Magellan Midstream is favorably positioned to continue to accelerate revenue and earnings growth over the next few quarters.
Tulsa, Oklahoma-based Magellan Midstream Partners is a master limited partnership (MLP) that owns and operates a diversified portfolio of energy infrastructure assets. The partnership primarily transports, stores and distributes refined petroleum products and to a lesser extent, ammonia.
In 2011, the partnership’s pipeline volumes comprised 50% gasoline, 33% distillates (which include diesel fuels and heating oil), 10% crude oil, and 7% Liquefied Petroleum Gas (LPG)/aviation fuel. Magellan conducts its operations in three segments: Petroleum Products Pipeline System, Petroleum Products Terminals and Ammonia Pipeline System.
BP PLC (BP): Free Stock Analysis Report
MAGELLAN MDSTRM (MMP): Free Stock Analysis Report
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