On Jun 27, we have issued an updated research report on
Buckeye Partners LP
). The pipeline operator stands to benefit from its attractive
portfolio of fuel transportation assets. The acquisition of
) pipeline terminal assets by Buckeye is expected to bring in
additional customers, which in turn will fetch lucrative returns to
the partnership. Buckeye was able to secure multi-year storage and
throughput for these facilities from Hess' Retail Marketing
On the flip side, the partnership's assets are located in regions
which are exposed to severe weather variations which might pose
operational risks. Moreover, strict environmental legislations
could lead to a rise in compliance costs.
Buckeye Partners, a Zacks Rank #3 (Hold) stock, posted unfavorable
results in the first quarter of 2014 with bottom line lagging the
Zacks Consensus Estimates. Escalating costs along with dilution
from higher units outstanding negatively impacted earnings.
Revenue, on the other hand, beat our expectation thanks to
increased contributions from Buckeye Partners' Merchant Services,
Global Marine Terminals, Development & Logistics and Pipeline
and Terminal operations.
Going ahead, oil production is displaying a strong growth
trajectory in the U.S. owing to modern drilling technologies. As
per the Energy Information Administration, crude oil production is
estimated to reach 9.3 million barrels per day in 2015, a 25.7%
increase from 2013 levels. This will create a substantial demand
for pipeline capacity, which in turn will act as a tailwind for
Meanwhile, the partnership's quarterly distribution hike of 1.1% to
$1.10 per unit announced in May 2014 will retain investors'
confidence on the stock.
Key Picks from the Sector
Other better-ranked pipeline players include
Magellan Midstream Partners LP
Energy Transfer Partners, L.P.
). Both the stocks currently carry a Zacks Rank #1 (Strong
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