On June 5, Zacks Investment Research upgraded Tulsa, OK-based
publicly traded energy pipeline partnership
Magellan Midstream Partners L.P.
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Magellan Midstream's strong portfolio of energy infrastructure
assets, capacity expansion plans and a sound liquidity position
make it a great stock to own. Other positive attributes include its
investment grade rating and strong track record for distribution
Magellan Midstream owns an attractive portfolio of energy
infrastructure assets that generate stable and recurring fee- and
tariff-based revenues. This includes the longest U.S. refined
petroleum products pipeline system, access to more than 40% of
refining capacity in the continental U.S. along with imports, and
85 petroleum terminals with more than 80 million barrels of
Magellan Midstream, which recently posted stellar first quarter
earnings fueled by a combination of higher rates and an increase in
transportation volumes, has established a track record of
consistent distribution growth. Its current quarterly distribution
of 61.25 cents per unit ($2.45 per unit annualized) is up by 367%
since its initial public offering (IPO) at the beginning of 2001.
Lucrative acquisitions and organic growth projects have made major
contributions toward Magellan Midstream's development. Over the
last decade, the partnership has invested around $3.7 billion for
various ventures and takeovers. Between 2014 and 2016, Magellan
Midstream is looking to shell out another $1.1 billion to finish
construction projects currently underway. Additionally, the
partnership continues to look out for more than $500 million of
potential growth projects in the earlier stages of development.
Important projects include the Longhorn Pipeline, BridgeTex
Pipeline, and the Eagle Ford joint venture with
Kinder Morgan Energy Partners L.P.
), with a key focus on the Permian Basin. Counting on the success
of these developments, Magellan Midstream increased its full-year
2014 distributable cash flows estimate to $810.0 million from
$730.0 million. The partnership anticipates annual distribution to
grow by 20.0% in 2014 and 15.0% in 2015.
Financially, Magellan Midstream's conservative financial policy and
investment grade credit ratings provide a competitive advantage in
accessing capital at reasonable cost. Additionally, with no
near-term debt maturities and a $1 billion revolver available under
credit facility, the partnership is well equipped to face this
highly uncertain period for the economy.
Based on the success of the partnership's high-quality and diverse
portfolio of midstream assets, analysts are predicting strong
earnings growth for Magellan Midstream over 2014. The current year
Zacks Consensus Estimate of $3.30 represents earnings per unit
growth of 28% over 2013.
Other Stocks to Consider
Apart from Magellan Midstream, investors interested in the energy
pipeline partnerships may consider stocks like
Delek Logistics Partners L.P.
Boardwalk Pipeline Partners L.P.
). Both these stocks carry a Zacks Rank #1 (Strong Buy).
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