Knowing the factors that help or hurt a stock can be
Magellan Midstream Partners (
) is an oil and gas pipeline master limited partnership. It went
public in 2001.
Let's look at how the stock has performed vs. the price of
crude oil over the past 11 years.
Overall, Magellan Midstream has gained 547% while crude oil
rose 238%. The ascent of the pipeline company's stock has been
smoother than the at-times volatile action of crude oil.
Magellan's earnings Stability Factor reflects this with a
three-year rating of 8 and a five-year rating of 22. The gauge
ranges from 0 (calm) to 99 (wild).
The volatile nature of oil prices helps Magellan. Volatility
increases demand for Magellan's storage facilities.
Yet, the share action of Magellan isn't always in step with
the price of crude oil. In four of the past 11 years through
2011, the pipeline stock moved in a different direction than oil
prices. So far, 2012 looks like another divergence.
The proportions of the moves also can be sharply
Economic demand is a better gauge for Magellan's stock action.
Eight of 10 times, Magellan's stock will move in the same
direction as U.S. real GDP.
So if investors focus on the price of oil when judging
Magellan, they are zeroing in on a flawed metric. The economy
remains the chief driver.
Risk factors include a shift to more fuel-efficient vehicles
and the use of alternative fuel sources. The common factor in
both is government actions, which include mandates with deadlines
on fuel efficiency and alternative fuels in 2017 and 2022,
Earnings increased 29% and 28% on revenue gains of 54% and 12%
in 2010-11. The Street expects only 9% EPS growth this year on a
9.5% sales pop.
Pretax margin was 23.8% last year, second in the past nine
years to 2008's 26.5%. Return on equity was 28.3% in 2011.
The company completed a 2-for-1 split on Oct. 15.
The quarterly distribution is 47.125 cents a share for an
annualized yield of 4.3%.