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Goldman On Pipelines, MLPs: Archrock, Delek Upgraded; USA Compression Downgraded

Goldman On Pipelines, MLPs: Archrock, Delek Upgraded; USA Compression Downgraded - Archrock Partners LP NASDAQ:APLP, DKL

Goldman Sachs has upgraded its rating on Archrock Partners LP (NASDAQ: APLP) and Delek Logistics Partners LP (NYSE: DKL) and downgraded USA Compression Partners LP (NYSE: USAC).

Broad Trends

In its report published Monday, Goldman Sachs noted it expects 10-year Treasury yield to stay below 3 percent through 2017, serving as a positive driver for midstream valuation and cost of capital.

Referring to oil, the analysts stated they are more confident in the medium term call on U.S. production — which will boost utilization rates — but are uncertain concerning the near-term outlook, taking into account the overcapacity and new market entrants.

Furthermore, Goldman Sachs maintains its bullish view on natural gas "given growing supply (Marcellus/Utica) and demand (industrial, LNG, power, Mexico)."

The analysts reduced their median midstream target yield to 7.5 percent from 8.1 percent estimated previously, which implies 13 percent up movement. The investment bank gave a Buy rating to both Archrock Partners and Delek Logistics Partners, taking into consideration "attractive relative valuation and upside growth opportunity".

Ratings And Targets

Goldman Sachs upgraded Archrock Partners from Neutral to Buy, mentioning a $14 target on its stock price for a 12-month horizon. It changed the Delek Logistics Partners' previous Neutral rating to Buy as well, stating an estimated 12-month $32 target. On the other hand, the bank downgraded USA Compression Partners from Neutral to Sell, given that "the MLP to underperform peers due to distribution cut risk, stretched balance sheet and challenged outlook for compression fundamentals near-term". The current price target on USA Compression Partners is $13.

DateFirmActionFromTo
Jun 2016Goldman SachsUpgradesNeutralBuy
Feb 2016Bank of AmericaDowngradesBuyNeutral
Jan 2016Credit SuisseMaintainsOutperform

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