Diversified midstream energy operator
Genesis Energy L.P.
) raised its third quarter 2012 cash distribution to 47.25 cents
per unit ($1.89 per unit annualized), representing an increase of
approximately 2.7% sequentially and 10.5% year over year.
Importantly, the latest payout marks the 29th consecutive quarterly
distribution hike by the pipeline operator, of which 24 increases
have been 10% or more year over year.
GENESIS ENERGY (GEL): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
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Genesis Energy's announced distribution boost is in sync with its
goal of delivering disciplined growth to unitholders. The
partnership boasts of a consistent and improving financial policy
with high distribution coverage. Genesis Energy's new distribution
is payable on November 14 to unitholders of record as on November
Houston, Texas-based Genesis Energy is a master limited partnership
that operates crude oil pipelines and is an independent gatherer
and marketer of crude oil in North America, with operations
concentrated in Texas, Louisiana, Alabama, Florida, Mississippi and
New Mexico. Genesis Energy engages in three business segments:
Pipeline Transportation, Refinery Services, and Supply and
Genesis Energy - which acquired interests in Gulf of Mexico oil
Marathon Oil Corp.
) in January - currently retains a Zacks #2 Rank, which translates
into a short-term Buy rating.
With a juicy distribution yield of 5.6%, a business model focused
on operational efficiencies and attractive acquisitions/growth
projects, Genesis Energy provides investors with a steady,
predictable income stream.
Valuation also looks reasonable for Genesis Energy. The stock is
going for about 29.7 times forward estimates, same as the peer
group average. Additionally, its price-to-sales (P/S) ratio of 0.8
is essentially in-line with what similar firms offer.
On top of this, earnings growth is expected to be strong in 2012
and 2013, based on the solid fixed margin businesses and limited
commodity price exposure.
The 2012 Zacks Consensus Estimate is $1.13, representing 17%
earnings per unit growth over 2011. Next year's average forecast is
$1.34, corresponding with 18% growth.