Magellan Upped to Buy


On Dec 28, Zacks Investment Research upgraded publicly traded energy pipeline partnership Magellan Midstream Partners LP (MMP) to a Zacks Rank #2 (Buy).   

Why the Upgrade?

Operating environment and future growth prospects seem bright for Magellan as earnings estimates for the Tulsa, Oklahoma-based partnership are on the rise. Over the last 60 days, the Zacks Consensus Estimate for fourth-quarter 2013 rose 9.3% to 82 cents per unit, as most of the estimates (8 out of 11 estimates) were revised higher. Moreover, the Zacks Consensus Estimate for full-year 2013 is $2.53 per units, up 1.6% as 10 out of 12 estimates were revised higher during the same time frame.

Additionally, Magellan owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee- and tariff-based revenues. This includes the longest U.S. refined petroleum products pipeline system, access to more than 40% of refining capacity in the continental U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage.

Magellan has also established a track record of consistent distribution growth – its current quarterly distribution of 55.75 cents per unit ($2.23 per unit annualized) is up by 325% from its initial public offering at the beginning of 2001.

Finally, we believe that the partnership’s acquisition of Rocky Mountain pipeline properties from Plains All American Pipeline LP (PAA) will help Magellan to generate significant cash flow by serving new geographic regions. The 550-mile property has 4 terminals with a storage capacity of 1.7 million barrels. The system carries refined fuels to South Dakota, Colorado and Wyoming.  

Other Stocks That Warrant a Look

One can also look at better-ranked players in the energy sector like Athlon Energy Inc. (ATHL) and Harvest Natural Resources Inc. (HNR). Both the stocks sport a Zacks Rank #1 (Strong Buy). 

Read the Full Research Report on MMP
Read the Full Research Report on ATHL
Read the Full Research Report on PAA
Read the Full Research Report on HNR

Zacks Investment Research

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