On Aug 10, Zacks Investment Research upgraded
Delek Logistics Partners, LP
) to a Zacks Rank #1 (Strong Buy).
DELEK LOGISTICS (DKL): Free Stock Analysis
MAGELLAN MDSTRM (MMP): Free Stock Analysis
PIONEER SW EGY (PSE): Free Stock Analysis
ROSE ROCK MIDST (RRMS): Free Stock Analysis
To read this article on Zacks.com click here.
Why the Upgrade?
This partnership focused on owning and operating midstream energy
infrastructure delivered positive earnings surprises in two out
of the last three quarters with an average beat of 9.40%. The
long-term expected earnings growth rate for this stock is 11.0%.
Delek Logistics Partners' earnings per unit in the second quarter
were 47 cents, 2.2% higher than the Zacks Consensus Estimates.
Higher volumes from Texas marketing operations and the SALA
Gathering System boosted the performance of the partnership.
Having started its operations in Nov 2012, the partnership has
plans to grow via an acquisition strategy in the next 18 months
besides organic initiatives. Delek Logistics Partners has already
completed a couple of acquisitions in Jul 2013, which are
expected to add nearly $11.2 million to its annual EBITDA.
The partnership was able to expand its financial flexibility in
the reported quarter by $175 million to $400 million. This will
provide an impetus to its growth plans.
The strong performance also enables Delek Logistics Partners to
reward its unitholders through regular distribution payments. The
partnership's current quarterly distribution rate of 39.5 cents
reflects a 2.6% sequential increase from 38.5 cents distributed
in the first quarter.
The present valuation also makes the partnership attractive. The
forward P/E multiple of the partnership is 15.4%, a discount of
31.83% to the peer group average of 22.62%. The ROE of the
partnership is 31.0%, which is substantially higher than the peer
group average of 5.9%.
The Zacks Consensus Estimate for 2013 has risen 5.9% in the last
7 days to $1.98 per unit, reflecting year-over-year growth of
475%. For 2014, the Zacks Consensus Estimate increased 4.6% in
the past one week, reflecting year-over-year growth of 4.7%.
Besides Delek Logistics Partners, other operators in the sector
having a favorable Zacks Rank are
Magellan Midstream Partners LP
Pioneer Southwest Energy Partners L.P.
Rose Rock Midstream, L.P.
). Magellan Midstream Partners currently retains a Zacks Rank #1
(Strong Buy) while Pioneer Southwest Energy and Rose Rock
Midstream carry a Zacks Rank #2 (Buy).