Delek Logistics Partners, LP DKL operates logistics and marketing assets for crude oil, and intermediate and refined products in the United States. The firm has strong presence in the Permian Basin region.
This Zacks Rank #1 (Strong Buy) firm is a promising bet at the moment, as its logistics assets are strategically placed to benefit from the rising activity in the Permian Basin.
The Zacks Consensus Estimate for 2020 earnings is pegged at $3.93 on revenues of $587.2 million. This implies 36.46% and 0.4% increase for the bottom line and the top line, respectively, from the year-ago reported figures.
Its long-term (three to five years) earnings growth rate is 2%.
Financial Flexibity & Distribution
The firm’s financial flexibility and increasing distributable cash flow supports cash distribution growth of the partnership. On Oct 25, 2019, Delek Logistics declared a quarterly cash distribution of 88 cents per common limited partner unit for the third quarter, which equates to $3.52 per common limited partner unit on an annualized basis. This distribution was paid on Nov 12, 2019 to unitholders, which reflected 11.4% year-over-year increase from 79 cents or $3.16 per unit annualized.
The firm’s Lion Pipeline Systems and SALA Gathering systems are supported by a long-term contract that includes three take or pay commitments. In addition, more than 52% of the total contracts of Delek Logistics have a duration of more than five years, which provides visibility to its long-term earnings.
JV in Permian Basin
Delek Logistics has assets in the productive Permian Basin of the United States. In addition to its owned pipelines assets, the joint venture assets are supporting long-term growth of the firm. Caddo Pipeline, equally owned by the partnership and Plains All American Pipeline, L.P. PAA and RIO pipeline, owned 67% by MPLX LP MPLX and rest by Delek Logistics, is expected to have positive impact on earnings.
Units of Delek Logistics have outperformed its industry in the past 12 months.
Another Stock to Consider
Another stock in the same industry sporting a Zacks Rank #1 is Shell Midstream Partners, L.P. SHLX. The firm delivered positive earnings surprise of 2.16% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Its long-term earnings growth is pegged at 1%, and the Zacks Consensus Estimate for 2020 earnings has moved up 8.2% to $1.71 per share in the last 60 days.
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