On Sep 27, Zacks Investment Research upgraded Tulsa, OK-based publicly traded energy pipeline partnership Magellan Midstream Partners LP (MMP) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Magellan Midstream’s strong portfolio of energy infrastructure assets, capacity expansion plans and a sound liquidity position make it a great stock to own. Other positive attributes include its investment grade rating and strong track of distribution growth.
Furthermore, Magellan Midstream raised its full-year distributable cash flow estimate to $840 million from $810 million, based on strong financial results and a positive outlook for the remaining part of the year. The partnership also anticipates annual distribution to grow by 20% in 2014.
Detailed Analysis
Magellan Midstream owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee- and tariff-based revenues. This includes the longest U.S. refined petroleum products pipeline system, access to more than 40% of refining capacity in the continental U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage.
Moreover, Magellan Midstream has established a record of consistent distribution growth – its current quarterly distribution of $0.64 per unit ($2.56 per unit annualized) is up 388% since its initial public offering (IPO) in early 2001.
Additionally, lucrative acquisitions and organic growth projects have made major contributions toward Magellan Midstream’s development. Over the last decade, the partnership has invested around $3.7 billion in various ventures and takeovers. Between 2014 and 2016, Magellan Midstream is looking to shell out another $1.1 billion to wrap up construction projects currently underway. Additionally, the partnership continues to look out for more than $500 million of potential growth projects in the earlier stages of development.
Finally, Magellan Midstream’s conservative financial policy and investment grade credit ratings provide a competitive advantage in accessing capital at a reasonable cost. Additionally, with no near-term debt maturities and a $1 billion revolver available under credit facility, the partnership is well equipped to endure high economic uncertainty.
Other Stocks to Consider
Apart from Magellan Midstream, investors interested in the energy pipeline partnerships may consider stocks like Delek Logistics Partners LP (DKL), Spectra Energy Partners LP (SEP) and Sunoco Logistics Partners LP (SXL). All these stocks sport a Zacks Rank #1 (Strong Buy).
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