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What Do Analysts Recommend for Magellan Midstream Partners?

Ruth King

Did Magellan Midstream Partners Beat 1Q16 Earnings Estimates?

(Continued from Prior Part)

Analysts’ recommendations

According to a Bloomberg survey, ~65% of analysts rate Magellan Midstream Partners (MMP) a “buy,” 29% rate the MLP a “hold,” and 6% rate it a “sell.” The consensus target price for MMP is $76.20 per share. Its units are currently trading at $71.10. If the MLP hits its target price within a year, it would mean a 7% return for investors.

As for other midstream companies, 85% of analysts rate Enterprise Products Partners (EPD) a “buy,” and 67% rate Energy Transfer Partners (ETP) a “buy.” In comparison, only 46% of analysts rate Williams Partners (WPZ) a “buy.”

The above table shows the recommendations and target prices for Magellan Midstream Partners from some of the brokers surveyed. Among the brokers that rated MMP after its 1Q16 results, Morgan Stanley has given it a target price of $72, whereas RBC Capital Markets has provided a 12-month target price of $84. Raymond James has given the stock a target price of $78.

Magellan Midstream Partners forms 2.2% of the Guggenheim Mid-Cap Core ETF (CZA), which invests in mid-cap common stocks, including MLPs.

Outlook for MMP

Magellan Midstream Partners increased its 2016 distributable cash flow guidance by $10 million to $910 million based on strong results so far in the year and “higher commodity prices than initially expected for the year.” It aims to increase distributions by 10% for 2016 and by at least 8% for 2017. MMP’s low leverage and strong coverage continue to remain its strengths.

Michael Mears, chief executive officer, stated, “We remain committed to our disciplined financial policy, our focus on operational safety and our execution on strategic growth projects to benefit Magellan’s future.”

MMP expects to spend $800 million in 2016 and $150 million thereafter to complete its current construction projects.

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