Shares of MarkWest Energy Partners LP (MWE) hit a 52-week high of $76.84 on Aug 20, 2014. In fact, the natural gas processor and distributor has seen its stock price climb nearly 15% since the beginning of the year.
Why the Bullishness?
MarkWest Energy has a high-quality asset base that generates stable and continuous revenues through long-term fee-based contracts. The partnership is one of the major processors of natural gas in the Northeast and is the largest gatherer of natural gas in the prolific Carthage field in East Texas.
Moreover, MarkWest Energy is a growth-focused master limited partnership with a consistent distribution growth record. Last month, it raised the second-quarter 2014 cash distribution by 1.2% sequentially and 4.8% year over year to 88 cents per unit or $3.52 per unit annualized.
We also remain particularly bullish about MarkWest Energy’s prospects in the Marcellus Shale play in western Pennsylvania and West Virginia. With its track record of supporting producers in exploiting shale plays, it is in a great position to participate in the development of the Marcellus Shale leaseholds.
Additionally, during the second-quarter results, MarkWest Energy announced several expansion projects that should aid its growth plans. Moreover, the partnership increased its fee-based margin during the quarter, as earlier proposed. This brings in greater stability for the partnership.
However, MarkWest Energy’s core business – natural gas processing – still faces a higher degree of commodity price exposure than most MLPs. This is expected to limit its ability to deliver positive earnings surprises.
This accounts for MarkWest Energy’s current Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Stocks to Consider
With MarkWest Energy shares trading at a 52-week high, any upside from here may be limited. Meanwhile, one can consider better-ranked players from the same industry like Sunoco Logistics Partners L.P. (SXL), Valero Energy Partners LP (VLP) and Delek Logistics Partners, LP (DKL). Sunoco Logistics and Valero Energy sport a Zacks Rank #1 (Strong Buy), while Delek Logistics has a Zacks Rank #2 (Buy).
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