We reiterate our Neutral recommendation on
Buckeye Partners LP
). Buckeye Partners is a major contender in the U.S. energy sector
with its pipelines business being one of the largest in terms of
volumes delivered. The proposed agreement between Buckeye Partners
and Chevron Inc. regarding the acquisition of a marine terminal
facility for liquid petroleum products will act as a propeller to
the partnership's growth in the long run.
The partnership also made additions to its inorganic asset base
by entering into a long-term contract for the construction of an
additional 1.2 million barrels of crude oil storage capacity at the
Bahamas Oil Refining Company International Limited (BORCO) facility
However, the partnership's financial results are influenced by
volatility in demand and irregular weather patterns. Moreover,
tight environmental and federal regulations also tend to undermine
the partnership's utility operations.
On the positive side, Buckeye is actively engaged in organic
growth and cost-reduction opportunities. In the first quarter of
2012, the partnership made capital investments of $74.3 million out
of which $13.1 million is allotted for sustaining expenditures and
$61.2 million for expansion and cost cutting programs in the
future. Buckeye also has a solid financial position which enables
it to keep track of its growth momentum and reward unitholders.
Other negatives that might create bottlenecks in the
partnership's stock portfolio includes commodity market risks
resulting from price volatilities relating to natural gas storage,
decline in unit prices owing to increased competition from other
attractive investment opportunities and financial as well as
operational risks associated with non-fulfillment of contractual
obligations by third parties.
The partnership underperformed in the first quarter of 2012 with
both earnings and revenue coming in below the corresponding Zacks
Consensus Estimates. On a year-over-year basis, revenue increased
marginally by 0.5% to $1,259.4 million while earnings declined by
25 cents to 54 cents per unit in the reported quarter.
The Zacks Consensus Estimates for the second quarter and fiscal
2012 are currently pegged at 66 cents per unit and $2.84 per unit,
Buckeye Partners presently retains a Zacks #3 Rank which
translates into a short-term Hold rating. The partnership's peers
Williams Companies, Inc.
AmeriGas Partners LP
Based in Houston, Texas Buckeye Partners, L.P. owns and operates
refined petroleum products pipeline systems in the United States.
The partnership's Pipelines and Terminals segment transports
refined petroleum products and provides bulk storage and terminal
throughput services in the continental United States.
AMERIGAS PARTNR (APU): Free Stock Analysis
BUCKEYE PARTNRS (BPL): Free Stock Analysis
WILLIAMS COS (WMB): Free Stock Analysis Report
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