On May 22, 2013, we upgraded our recommendation on
Plains All American Pipeline L.P.
) to Outperform from Neutral. The partnership currently has a
Zacks Rank #3 (Hold).
Why the Upgrade?
There are several catalysts, including Plains All American
Pipeline's favorable performance in the first quarter of 2013,
strong contribution from inorganic as well as organic projects
and operational efficiency, which led to the improvement of the
In first-quarter 2013, the partnership's earnings per unit and
revenues beat the Zacks Consensus Estimates and the year-ago
figures owing to proper implementation in margin-based Supply and
Logistics segment, and robust performance from the fee-based
Transportation and Facilities segments.
It is evident from Plains All American Pipeline's recent
activities that the partnership continues to follow steady
organic growth strategy. The partnership is developing its
Mississippian Lime pipeline, Rainbow 2 pipeline and Gardendale
Gathering System projects.
During the first three months of 2013, Plains All American
Pipeline's net cash provided by operating activities increased
more than 200% year over year to $979 million. Strong liquidity
position enables the partnership to invest additional $300
million in 2013, which will drive the capital expenditure to $1.4
Apart from investment in several projects, strong financial
position also allows Plains All American Pipeline to enhance the
shareholders' wealth through increase in cash distribution at
regular intervals. Recently, the partnership's quarterly cash
distribution rate increased to 57.50 cents from 56.25 cents per
unit in the last quarter.
We believe Plains All American Pipeline's future growth will be
from its strategic acquisitions, and strong crude oil pipelines
and storage asset-portfolio in prospective oil producing
Other Stocks to Consider
Other stocks from the industry that are presently performing
Delek Logistics Partners, LP
) with a Zacks Rank #1 (Strong Buy), and
Enbridge Energy Management LLC
Kinder Morgan Management
) with a Zacks Rank #2 (Buy).
DELEK LOGISTICS (DKL): Free Stock Analysis
ENBRIDGE ENERGY (EEQ): Free Stock Analysis
KINDER MORG MGT (KMR): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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