On Mar 28, Zacks Investment Research upgraded
Calumet Specialty Products Partners L.P.
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Indianapolis-based Calumet has a proven record of growth through
acquisitions. The partnership has been aggressive in purchasing
assets that help support its cash flow stability and complements
its business. The latest in this series is the buyout of San
Antonio, Texas, refinery assets from another partnership
NuStar Energy L.P.
) for about $115 million.
Importantly, Calumet has raised distributions by approximately
38% over the past two years and currently dishes out an
impressive 7.0% yield. On Jan 14, the producer of specialty
hydrocarbons in North America hiked its quarterly cash
distribution to 65 cents per unit ($2.60 per unit annualized),
representing an increase of approximately 4.8% sequentially and
22.6% year over year.
Units of Calumet have soared in 2013, but remain cheap as
earnings estimates also went up. In addition to trading around
11.3 times forward estimates (under the S&P 500 average of
14.6), the partnership has a price-to-book (P/B) ratio of 2.5.
Moreover, a price-to-sales (P/S) ratio of just 0.5 suggests that
the stock is still undervalued. (A P/S ratio lower than 1.0, a
P/E below 15.0 and a P/B ratio under 3.0 generally indicate
value). The PEG ratio comes in at a miniscule 0.32, a 68%
discount to the benchmark of 1 for a fairly priced stock.
Calumet's consistent and improving financial policy, together
with a high distribution coverage and low valuation metrics means
that the partnership is expected to significantly outperform the
broader U.S. equity market over the next one to three months.
Other Stocks to Consider
In addition to Calumet, there are certain other downstream energy
PBF Energy Inc.
Marathon Petroleum Corp.
) that offer value and are worth buying now. Both these firms
sport a Zacks Rank #1 (Strong Buy).
CALUMET SPECLTY (CLMT): Free Stock Analysis
MARATHON PETROL (MPC): Free Stock Analysis
NUSTAR ENERGY (NS): Free Stock Analysis
PBF ENERGY INC (PBF): Free Stock Analysis
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