We retain our Neutral recommendation on
Buckeye Partners L.P.
). Currently, the petroleum products pipeline operator carries a
Zacks Rank #3 (Hold).
Why the Reiteration?
Buckeye Partners reported strong earnings results in the first
quarter of 2013 breezing past our expectation thanks to a robust
business from its pipeline and terminal operations.
The reiteration, however, takes into account the uncertainty
regarding the performance of its Energy Services segment which
has generated weak revenues owing to market backwardation in its
service areas. We believe this particular business will continue
to pose challenges for Buckeye in the upcoming quarters.
Furthermore, the partnership's operations are concentrated in
areas which are highly exposed to harsh weather conditions. This
can likely damage infrastructure and disrupt operations. An
active hurricane season projected by the National Oceanic
Atmospheric Administration in 2013 might put Buckeye's deepwater
operations in harm's way.
Nevertheless, several key drivers like the tariff rate
increase of 7% effective from May 1, 2013 and encouraging
development of the Bahamas Oil Refining Company International
Limited terminal will bode well for the partnership's growth
Buckeye Partners also has various domestic projects lined up
in the coming years which will boost its prospects. Chief among
them is the Perth Amboy Terminal to Linden pipeline network that
is expected to come online by Apr 2014. Moreover, increased
drilling activities in the reserves-rich Marcellus and Utica
basins will propel the partnership's pipeline operations.
We however believe environmental regulatory pressures will
keep a lid on Buckeye's performance.
Other Stocks to Consider
Pipeline players presently looking good are Zacks Ranked #2
Atlas Pipeline Partners, L.P.
MarkWest Energy Partners, L.P.
Spectra Energy Partners, L.P.
ATLAS PIPLN PTR (APL): Free Stock Analysis
BUCKEYE PARTNRS (BPL): Free Stock Analysis
MARKWEST EGY PT (MWE): Free Stock Analysis
SPECTRA EGY PTR (SEP): Free Stock Analysis
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