On Aug 16, Zacks Investment Research upgraded Oiltanking
Partners L.P. (
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
This partnership provides pipeline and related services to the
oil and gas operators in the U.S. The oil and gas pipeline
operator registered back-to-back earnings surprises with an
average beat of 23.43%. The expected long-term earnings growth
rate of this pipeline operator is 28.7%.
This pipeline operator registered a positive earnings surprise of
29.8% in the second quarter on the back of a solid sales surprise
of 26.2%. The higher storage and throughput fee revenues boosted
the top-line performance of the partnership.
The partnership has been investing steadily to expand its
existing operations and storage capabilities. It will invest in
the range of $135 million to $145 million in 2013 to execute its
ongoing growth projects. Oiltanking Partners is presently working
on the Appelt Phase crude storage expansion project. This project
will increase total storage capacity by 3.3 million barrels to 25
million barrels, once it is completed by 2014 end.
In addition to ongoing development projects, the partnership is
evaluating the possibility of new projects that will further
strengthen its Houston terminal. Moreover, the partnership is
assessing its option to start a project in Beaumont given
increasing customer interest in the region. Oiltanking Partners'
transportation and storage capabilities in key production areas
are likely to spur demand for its services going forward.
The strong performance is also reflected in its cash
distribution. Oiltanking Partners has consistently increased its
distribution every quarter since going public in the third
quarter of 2011. In Jul 2013, the partnership increased the
quarterly distribution rate to 42.5 cents per unit, reflecting a
sequential increase of 4.9% and a year-over-year increase of
The present valuation also makes Oiltanking Partners attractive.
The forward P/E multiple of the partnership is 20.9%, in line
with the peer group average. The ROE of the partnership is 12.4%,
which is 117.5% higher than the peer group average of 5.7%.
The Zacks Consensus Estimate for 2013 has risen 8.4% in the last
7 days to $2.31per share, reflecting year-over-year growth of
47.04%. For 2014, the Zacks Consensus Estimate increased 14.6% in
the past one week to $2.75, reflecting year-over-year growth of
Besides Oiltanking Partners, other operators in the sector having
a favorable Zacks Rank are
Magellan Midstream Partners L.P.
Pembina Pipeline Corp.
Delek Logistics Partners, L.P.
). Magellan Midstream Partners currently has a Zacks Rank #1
(Strong buy), while Pembina Pipeline and Delek Logistics carry a
Zacks Rank #2 (Buy).
MAGELLAN MDSTRM (MMP): Free Stock Analysis
OILTANKING PTNR (OILT): Free Stock Analysis
PEMBINA PIPELN (PBA): Free Stock Analysis
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