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4 Reasons Magellan Midstream Partner Is Rated A Buy At Argus

Argus reiterated its Buy rating on Magellan Midstream Partners, L.P. MMP 0.17%, after a better-than-expected Q2 EPS.

The analysts lifted their 2016 EPS estimate to $3.56 from $3.51, which is above the consensus of $3.51. Moreover, they raised the 2017 estimate to $3.86 from $3.84 to reflect incremental contributions from the Little Rock pipeline, which can transport 75,000 barrels of oil per day and entered service on July 5.

The analysts mentioned four factors their Buy rating is based on:

  • 1. The company derives most of its cash flow from long-term fee-based contracts, which minimizes the cash flow impact of low commodity prices.
  • 2. Lower commodity prices have boosted demand for refined products and increased through put volumes on the company's pipeline assets.
  • 3. The stock's current valuation does not appear to reflect new projects coming into service within the next two years, which should continue to boost distributable cash flow.
  • 4. The company has healthy distribution coverage metrics and a strong record of raising distributions — with 57 quarterly increases and compound annual distribution growth of 13 percent since the company's 2001 IPO.

Argus has an $85 price target on shares.

Aug 2016Morgan StanleyDowngradesEqual-weightUnderweight
Jul 2016Ladenburg ThalmannInitiates Coverage onBuy
Jun 2016Seaport GlobalInitiates Coverage onBuy

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