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Global Partners LP Message Board

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  • jcsreits jcsreits Oct 7, 2011 4:38 PM Flag

    Earnings estimates keep going down

    jrad52 Do you currently own glp? What do you suggest doing for someone who currently owns 1600 shares? Would you sell or do you expect a rebound next year? Is the company fundamentally sound or do you know? Your thoughts , please. Thanks

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    • I don't own it. I used to, but sold - one of the few bullets I dodged this year.

      Essentially, I think GLP is in a tough business but it's not one that I want to own. They're just a distributor. They distribute oil rather than cars or computers, or whatever, but they are still a distributor with lousy margins and too much debt.

      GLP's highest operating margin was a bit more than 1% in 2006. Most years, the operating margin is around .5% and so far this year, it's lower. And those numbers are before the gas station business, which I don't like at all.

      If you assume that at normal oil prices, GLP could gross $ 10 billion, an operating margin of .5% produces $ 50 million of operating income. They're at a run rate of $ 30 million in interest expense, leaving $ 20 million profit, or a little less than a dollar per unit. Bump up the operating margin a little, and they make more, but never a whole lot.

      And with GLP, I don't think you can ignore depreciation expense. I think for the most part its assets do depreciate.

      So I still don't want to buy it. After Q3 earnings, I think the price drops again.

      As to what you should do, I can't help. If you saw my other MLPs and how they have tanked in the last month or 2, you wouldn't want my advice. But I'm not buying GLP here.

 
GLP
41.64+0.15(+0.36%)Aug 20 4:02 PMEDT

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