Why Holly Energy Partners Is Outperforming Its Peers in 2016
Did Holly Energy Partners Beat 1Q16 Earnings Estimates?
HEP’s year-to-date return
Holly Energy Partners (HEP) has generated a return of 15% on a YTD (year-to-date) basis. In comparison, Valero Energy Partners (VLP), Delek Logistics Partners (DKL), and PBF Logistics (PBFX) have generated returns of -8%, -4%, and 2%, respectively, on a YTD basis. The Alerian MLP ETF (AMLP) has generated a return of 4% YTD. Holly Energy Partners was formed in 2004 by HollyFrontier Corporation (HFC). HFC has 39% ownership of HEP.
The above graph compares Holly Energy Partners’ YTD return with those of VLP, DKL, PBFX, and AMLP. One of the factors contributing to Holly Energy Partners’ steady growth is its minimum direct commodity price exposure. The MLP generates fee-based revenues for transport and storage of oil and other products, mostly through long-term contracts. HEP’s strong distribution coverage and consistent distribution growth contribute to its strong performance. Holly Energy Partners forms ~0.03% of the PowerShares Dividend Achievers Portfolio (PFM).
Mike Jennings, chief executive officer of HEP, said, “As we look forward, we believe HEP is positioned for continued growth due to the quality and geographic location of our assets, our talented employee base, and our financially strong and supportive general partner, HollyFrontier.”
Analysts’ recommendations
Of the analysts surveyed by Bloomberg, 43% rated Holly Energy Partners a “buy,” 43% rated it a “hold,” and 14% rated it a “sell.” The consensus 12-month target price for HEP is $36.20. Over the same period, the low and high target prices for the stock are $33 and $42, respectively. Currently, HEP’s stock is trading near $34.50. If it attains the median target price within a year, it would mean a 5% price return for investors.
Piper Jaffray rated the stock after 1Q16 earnings and has provided a 12-month target price of $42.
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