On Mar 19, 2013, Zacks Investment Research upgraded Exterran Partners L.P. (EXLP) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The partnership reported earnings surprises in the last three quarters with an impressive average beat of 57.2%. The long-term expected sales growth of Exterran is poised at 25.27%. Exterran’s effective tackling of its debt level with simultaneous focus on receiving high-return contracts and efforts towards cost-management will drive the partnership to post another earnings beat.
Given the increasing developmental activities by natural gas operators in the liquids-rich and shale basins, the demand for the partnership’s products and services has jumped, thereby fetching profitable returns. Moreover, the continued market growth of gas lift applications on secondary oil productions has further lent upside to earnings.
The partnership has a handful of key projects in Brazil, Mexico and the Middle East. Its capital outlay plan of $425.0 million to $450.0 million for 2013 and strong backlog of orders of $1.07 billion bear testimony to the fact that the partnership is generating adequate returns from its investments.
Exterran has recently increased the quarterly distribution rate by 2% to 51 cents per unit. The annual yield now comes to 8.18%, substantially higher than the industry average. The partnership witnessed strong distributable cash flow in 2012 which increased 30.7% to $118.0 million from $90.3 million in 2011.
However, limited activities in the dry gas area and uncertainty regarding retroactive rate increase might act as headwinds.
Other Stocks to Consider
Other oil as well as gas products and service providers who are presently performing well and have a Zacks Rank #1 (Strong Buy) are RPC, Inc. (RES) and Compressco Partners, L.P. (GSJK). Zacks Ranked #2 (Buy) Core Laboratories NV (CLB) is also worth a look.
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