22.80 +0.17 (0.75%)
Pre-Market: 7:51AM EST
|Bid||21.82 x 800|
|Ask||0.00 x 1000|
|Day's Range||22.62 - 23.24|
|52 Week Range||22.62 - 35.85|
|Beta (3Y Monthly)||1.06|
|PE Ratio (TTM)||9.82|
|Forward Dividend & Yield||2.71 (11.98%)|
|1y Target Est||N/A|
The market is making moves, and investors are taking notice. As we near the end of third quarter 2019 earnings season, Savita Subramanian of Merrill Lynch stated that following better-than-expected results, there appears to be a renewed sense of optimism.According to the analyst, companies that have already reported earnings have taken a "much more optimistic tone than in recent quarters," with 43% of companies using the word "optimistic" or "optimism" during their releases. This is up from the average of 37% in the two preceding quarters.So how can investors best take advantage of this renewed economic outlook? Wall Street pros suggest adding names capable delivering stable payouts, or more specifically dividend stocks. However, not all dividend stocks represent compelling investments as some boast significantly higher yields than others.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBearing this in mind, I used the TipRanks Stock Screener to zero in on seven dividend stocks to buy that consistently pay out over a 9% yield. This isn't too shabby when you compare it to the S&P 500's fiscal Q2 2019 average dividend yield of 1.92%. * 10 Stocks to Buy Regardless of Q3 Earnings Let's take a closer look. Stocks to Buy: Energy Transfer (ET) Source: Shutterstock Dividend Yield: 10%Energy Transfer, L.P. (NYSE:ET) is one of the largest and most diversified midstream energy companies in the U.S. After the company's Nov. 6 third-quarter earnings release, all eyes are on ET.Top analyst, RBC Capital's Elvira Scotto, believes that the company is on track to achieve an approximately 4.5x debt-to-EBITDA by the end of this calendar year. This is expected to be achieved through ramping up cash flows from Rover, Revolution, ME2/2X and several other growth projects as well as distribution payments slated for the end of 2021."With its slate of large-scale, primarily fee-based growth projects coming online and ramping, we expect cash flow growth to drive leverage meaningfully lower in the coming years, which should allow ET to return more cash to shareholders," she commented.This lends itself to her conclusion that ET will continue to reward investors with a stable dividend. We mean an annualized payout of $1.22 per share, which amounts to a yield of 9.7%. Based on all of the above, the five-star analyst predicts shares could soar 88% in the next twelve months.As seven Buy ratings have been assigned vs no Holds or Sells in the last three months, the message is clear: ET is a Strong Buy. Not to mention its $21 average price target brings the upside potential to 70%.See the ET stock analysis. MPLX (MPLX)Source: Shutterstock Dividend Yield: 11%Formed by Marathon Petroleum (NYSE:MPC), MPLX, L.P. (NYSE:MPLX) owns and operates energy logistics and infrastructure assets as well as provides fuel distribution services.Coming on the heels of its third-quarter earnings and sales beat, MPLX appears primed to deliver massive returns. Net income attributable to MPLX came in at $629 million, up from $510 million in the prior-year quarter. Adding to the good news, further gains are expected to be fueled by its Andeavor Logistics acquisition which was finalized at the end of July.CEO Gary R. Heminger added, "Additionally, we moved forward with high-grading our growth capex portfolio and today announced a growth capital target of approximately $2.0 billion for 2020."As management has outlined a clear growth path, MPLX is likely to remain a high dividend payer, or 10.3% annualized to be exact.With this in mind, RBC Capital analyst TJ Schultz maintained his bullish thesis. While he did lower the price target from $38 to $33, the five-star analyst still sees 31% upside potential in store for the energy company.Like Schultz, the rest of the Street is optimistic about MPLX. Seven Buy ratings and one Hold received over the last three months add up to a Strong Buy analyst consensus. Its average price target of $34 suggests shares could surge 33% in the next year. * 7 of the Best Internet Stocks to Buy See the MPLX stock analysis.To learn more about dividend stocks, Neil George is selling special access to his book Income for Life: 65 Income Streams ANYONE Can Collect for just $1. New York Mortgage (NYMT)Source: Shutterstock Dividend Yield: 13%New York Mortgage Trust, Inc. (NASDAQ:NYMT) manages a portfolio of assets with the goal of delivering stable returns to its clients. The real estate investment trust (REIT) invests in and manages mortgage-related assets. That being said, its strength as a dividend stock makes it a stand out.We aren't talking chump change here. NYMT has consistently rewarded investors with an $0.80 annualized payout, putting the dividend yield at 12.8%. This is nothing short of impressive when you consider the financial sector average of 0.04%.According to Maxim Group analyst Michael Diana, the company's focus on book value and credit strategies has the potential to cement NYMT's status as a reliable profit generator and dividend name. "In our view, NYMT deserves a premium valuation to the group due to its strong track record of preserving book value and its focus on credit strategies in an environment which we regard as favorable for credit strategies," he explained.In general, the opinion on the Street is more mixed. Its Moderate Buy consensus rating comes from the 1 Buy and 1 Hold NYMT racked up in the previous three months. However, shares could rise 14% in the next twelve months.See the NYMT stock analysis. Two Harbors (TWO)Source: Shutterstock Dividend Yield: 11.3%Like NYMT, Two Harbors Investment Corporation (NYSE:TWO) is an REIT, with its primary focus being residential mortgage-backed securities (RMBS). While it faces steep competition in the financial sector, the company has the advantage thanks to its limited sensitivity to interest rates. Louis Navellier, a legendary investor in his own right, calls stocks like these "bulletproof stocks" and you can learn more about them here."Two Harbors is a hybrid mortgage REIT with less rate sensitivity due to differentiated agency MBS/MSR pairing strategy along with a unique, legacy credit-oriented portfolio," RBC Capital analyst Kenneth Lee explained. This reasoning played into Lee's decision to start coverage with a bullish call and set a $15 price target.Given its ability to generate profits regardless of the current macro backdrop, it's a positive sign that TWO can continue to hand over a hefty dividend payout. We're talking 40 cents paid out each quarter, bringing the annualized sum to $1.60 per share or an 11.5% yield.Looking at the analyst consensus breakdown, the rest of the Street has high hopes for TWO. Factoring in the three buys assigned over the last three months, the stock earns Strong Buy status. * 7 Stocks to Buy That Save You Money See the TWO stock analysis. Oasis Midstream Partners (OMP)Source: Shutterstock Dividend Yield: 11.4%Oil and gas producer Oasis Midstream Partners L.P. (NYSE:OMP) has captured Wall Street's attention after its Nov. 5 third-quarter earnings release.Investors were happy to learn that quarterly cash distribution gained 5% from the preceding quarter. Adding to the good news, OMP signed additional third-party agreements in the Delaware and Williston Basins as well as saw solid water service volumes.However, its 11.4% dividend yield caught my eye. OMP has been reliably paying out 49 cents per share each quarter, adding up to a $1.96 annualized payout. With a payout ratio of 61.7%, the energy company is poised to continue delivering big rewards to investors.All of this supports RBC Capital analyst TJ Schultz's assumption that OMP's growth narrative remains strong. While he did cut the price target from $25 to $22, the upside potential still comes in at 20%.In general, other analysts echo Schultz's sentiment. On top of garnering Strong Buy status, its $23 average price target puts the potential twelve month gain at 23%.See the OMP stock analysis. Ellington Financial (EFC) Source: Shutterstock Dividend Yield: 9%Ellington Financial Inc. (NYSE:EFC) is a specialty finance company serving clients located throughout the U.S. With EFC on track to raise its already impressive dividend, it's no wonder investors have been captivated by this stock.Even though some had originally expressed concerns regarding how EFC's transition to a REIT would impact its ability to hand out consistent payments, one top analyst is reassuring investors."We believe that EFC's recent conversion to a REIT, combined with our projected growth from its diversified business model, should lift the stock to a premium to its forward book value and in line with its core Mortgage REIT peer group. In addition, EFC is positioned to raise its dividend as its credit businesses grow, ROEs on its agency MBS strategy pick up, and REIT taxable income requirements increase distributions to shareholders," Nomura's Matthew Howlett commented.This is incredibly exciting news as the financial services company has already been steadily paying out $1.68 per share on an annual basis, or a 9% yield.All of the above factors prompted Howlett to start his EFC coverage by publishing a bullish call. Not to mention the four-star analyst's $20 price target implies shares could jump 9% in the next twelve months.Based on its 100% Street approval, EFC is a Strong Buy. The potential upside of 9% should also be taken into consideration. * 10 Stocks That Every 30-Year-Old Should Buy and Hold Forever See the EFC stock analysis. Black Stone Minerals (BSM) Source: Shutterstock Dividend Yield: 11.3%This oil and natural gas company has a lot to brag about. Not only does Black Stone Minerals, L.P. (NYSE:BSM) have a Strong Buy consensus rating and upside potential of 45%, but it also boasts a noteworthy dividend.Besting the basic materials sector average of 0.04%, BSM's yield comes in at 11.3% as a result of its $1.48 annualized payout per share. With a strong third-quarter performance under its belt, its ability to continue paying out these substantial sums looks secure.According to its Nov. 4 earnings release, production during the quarter reached 49.0 MBoe/d driven by a 14% year-over-year increase in royalty production. BSM also purchased $2.3 million-worth of properties in East Texas in the quarter, bringing total 2019 acquisition-related spending to $43.9 million.If this wasn't compelling enough, BSM has racked up substantial Wall Street support in the last three months. This includes the likes of JonesTrading analyst Eduardo Seda."We note that BSM had recently raised its production guidance for full-year 2019 to a range of 47.5 MBoe/d to 50.5 MBoe/d, a 5% increase midpoint to midpoint from prior guidance," the four-star analyst commented. With this in mind, he reiterated his Buy recommendation and $22 price target, indicating 69% upside from the current share price.See the BSM stock analysis.Legendary investor Louis Navellier has opinions of his own. Louis believes investors should buy bulletproof stocks that can thrive in any market.To prepare for a shifting market, Louis suggests steps that every investor should take right now:* Follow the money: Buy stocks that are seeing massive cash infusions.* Protect your portfolio: Invest in market-beating stocks with Louis' simple trick.* Go risk-off: Strong fundamentals are more paramount than ever.Louis' track record is enviable and stocked with winners, including the following: * 274% gain in semiconductor stock Nvidia * 134% gain in defensive plays * 123% gain in a personnel service stockTo learn how to invest in this shifting market, and to recieve Louis' top stock picks, click here.TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Maya Sasson did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Sell Before They Roll Over * 5 Beaten-Up Stocks to Buy That Could Be Saved By An Acquisition * 4 Startup Stocks Getting Smashed The post 7 Buy-Rated Stocks With Dividend Yields Over 9% appeared first on InvestorPlace.
MPLX's (MPLX) third-quarter results are boosted by higher throughput volumes, strong performance of its core business and the acquisition of Andeavor Logistics.
Moody's Investors Service ("Moody's") changed Marathon Petroleum Corporation's (MPC) outlook to negative from stable, while affirming its Baa2 senior unsecured rating and its P-2 short-term rating. Moody's also changed MPLX LP's (MPLX) outlook to negative from stable, while affirming its Baa2 senior unsecured rating.
Despite a surge last year, oil prices have been generally depressed since early 2015. The low prices have pushed down stock prices in the energy sector, which has paradoxically opened an opportunity for income investors.The energy sector’s production companies benefit from dealing in commodities – oil and gas – that are always in demand. They have high overhead, but they also have a ready market for the product and consequent strong cash positions. Low share prices are attractive to investors, and the companies have been following two strategies to boost their shares.First, they are simply buying back shares to support the price. And second, they are paying out high dividend yields, offering investors a steady income stream from the stocks. Average dividend yield in the energy sector is up to 3.9%, almost double the S&P 500’s average yield of 2.1%. Income investing is a viable option for energy investors; since 1998, dividends in the energy sectors have brought triple the returns of simple price appreciation.We’ve taken a dive into TipRanks’ Stock Screener tool to find three energy stocks offering investors the best combination – "strong buy" consensus, and dividend yields above 9%.MPLX LP (MPLX)When you think of the energy industry, chances are you picture an oil well out West, or the gas station down the street. But between the actual extraction and the end user, there is a string of processes, refineries, pipelines, and transport systems that make up the midstream infrastructure of the industry. MPLX, a partnership formed by Marathon Petroleum Corporation (MPC), owns and operates an array of these midstream assets, including pipelines, inland shipping, product terminals, refinery storage, and the docks and loading systems associated with them. In effect, MPLX handles the product transport while Marathon handles extraction and production. Marathon owns a 64% controlling interest in MPLX.In addition to transport infrastructure, MPLX also operates a series of natural gas gathering systems, processing the untreated gas to extract various components. These include ethane, ethylene, propane, butane, gasoline, propylene. The company then sells these natural gas products. The most important feature of MPLX’s business model, however, lies in the simple utility of energy transport niche. No matter what the price of crude oil or natural gas, the product still must reach the end user, and MPLX will get paid for that transportation.The infrastructure and natural gas-product niche has been good for MPLX. Since 2018, the company has consistently posted earnings between 52 cents and 62 cents per share. The most recent report, for Q2 CY19, showed revenues of $1.63 billion, just below the estimate of $1.64 billion. The year-over-year gain was modest, at $60 million. Shares slipped $1 after the report, and have been volatile since.MPLX has used its steady earnings to support a reliable, paying out 66.75 cents per share quarterly, or $2.67 per year. The company has been raising the dividend payment steadily since 2014, and the yield has increased from 2.1% then to the current 9.96%.Wall Street analysts have been pleased with MPLX and its performance. For example, Barclays’ analyst Christine Cho reinstated her bullish stance on the stock and pointed out that the company has plenty of options to streamline operations without compromising profitability. Cho rates MPLX an Overweight (i.e. "buy") along with a $33 price target, indicating room for over 20% upside. (To watch Cho's track record, click here)The analyst noted, “While the company today has a far broader set of assets to rely upon during periods of change across the industry, management has also made it clear that perhaps their assets are spread across too many basins and they could be looking to sell interests down the road. We believe investors would support asset sales as the company focuses on competing in its core basins in the Permian and Northeast.”Wall Street backs Cho's bullish bite into the energy player as well as TipRanks analytics exhibit MPLX as a Strong Buy. Out of 7 analysts polled in the last 3 months, 6 are bullish on the stock, while only one remains sidelined. With a return potential of 25%, the stock's consensus target price stands at $33.57. (See MPLX stock analysis on TipRanks)Energy Transfer (ET)As its name suggests, the next stock on our list is also involved in the energy pipeline industry, specifically the natural gas and propane niche. Energy Transfer is also the largest company on this list, with a market cap of $33.5 billion. For calendar year 2018, the company reported $54.09 billion in revenues, and net income of $4.04 billion.Like MPLX, Energy Transfer has been using its income and cash flow to maintain a hefty dividend. The company is paying out $1.22 per share annually, or 30.5 cents quarterly. The payout ratio, which compares the dividend payment to the earnings per share, is a healthy 84%, indicating that the company is returning most of its earnings to shareholders. And with a yield of 9.58%, this makes ET stock a boon for shareholders.5-star analyst Elvira Scotto takes a bullish position on ET shares. In a recent detailed report, after a meeting with a management and a tour of a company facility, Scotto wrote, “We believe ET is well-positioned to generate meaningful cash flow growth as large-scale growth projects come online over the next few years. Moreover, with an improved cost of capital following its simplification transaction and its expansive asset footprint, we expect ET to continue to identify accretive growth opportunities over the coming years while maintaining a strong balance sheet and significant excess distribution coverage.”Scotto sets a $23 price target on ET, showing her confidence in an 80.5% upside to this stock. Her target is significantly higher than the average; ET has an average price target of $20.50, suggesting a 60% upside from the trading price of $12.74. The analyst consensus on this stock is unanimous – the Strong Buy is based on 6 buy reviews from the past three months. (See ET stock analysis on TipRanks)Oasis Midstream Partners (OMP)The third company on our list is a small player in the midstream energy transport niche. Most of the company’s assets are located in North Dakota, in that state’s section of the Williston Basin. The basin as a whole also spreads into the states of South Dakota and Montana, as well as the Canadian provinces of Alberta, Saskatchewan, and Manitoba, and is one of the richest oil-producing regions in central North America.Oasis operates terminal and pipeline facilities for crude oil and natural gas. In addition, the company has a focus on water disposal and distribution. The oil drilling industry generates wastewater from the wells, both fresh and brine. The company operates facilities to dispose of wastewater and distribute the usable water.This company has had difficulty generating traction in recent quarters, possibly due to small size compared to many of its competitors. Oasis has a market cap of just $560.7 million, and stock dropped sharply after the Q2 report at the beginning of August, losing 15%, although shares have held steady since then. Oasis reported 76 cents EPS in that report, just below the 77 cents forecast, and showed revenue of $97.6 million, missing the estimate by 2.3%.Notwithstanding the problems that Oasis has been having meeting the earnings forecasts, the company still shows plenty of strength to attract investors. Earnings have been rising in the last four quarters. OMP’s dividend yield is an impressive 11.81%, almost six times the S&P average, and the annualized payout is $1.96 per share. The payout ration of 61.7% shows that the company should have no difficulty maintaining this dividend.Another 5-star RBC Capital analyst, TJ Schultz, sees room for growth in OMP. He notes that the company has a positive balance and a cash flow that can maintain its efforts to return income to investors. He writes, “We think OMP’s solid balance sheet, pipeline of dropdown assets, and stable E&P sponsor should enable the Partnership to grow cash flows and ultimately deliver top-tier distribution growth…” In line with this outlook, Schultz puts a $22 price tag on OMP, suggesting an upside of 32%. (To watch Schultz's track record, click here)We can see from TipRanks that OMP has regained its “Strong Buy” rating. In the last three months, the stock has received 3 "buy" and one "hold" ratings. Based on these ratings, the average $22.50 price target on OMP stock translates into upside of over 30% from the current share price. (See Oasis Midstream stock analysis on TipRanks)
The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as […]
When investors think of "insider trading," they might think of the kind of behavior to which ex-Rep. Chris Collins recently pleaded guilty. In that case, Collins used material, nonpublic information he gained from his seat on a biotechnology company's board to tip off his son and fiancée's father, who were able to sell shares before the info became public.But some insider trading is legal. And in some cases, insider buying can signal to regular investors that something positive might be in the offing.Insiders - directors, officers and shareholders that own more than 10% of at least one class of the company's stock - can (and do) buy and sell shares, sometimes frequently. They must abide by certain rules, such as not selling shares within six months of purchase. They also must disclose any transactions to the SEC - and these insider filings are available for public viewing, free of charge, on the SEC's EDGAR (Electronic Data Gathering, Analysis, and Retrieval) website.No one understands the challenges and victories of a public company better than the officers and directors who run it. Thus, when knowledgeable insiders buy or sell the company's shares, savvy investors take note. Sometimes these trades are habitual and mean nothing - but sometimes, they can signal a change in sentiment. A sudden spurt of insider buying may signal new products coming to market or new customers signing up, or simply reflect an insider's conviction that the stock is undervalued.Here are 10 stocks that have seen notable insider trading over the past few months. Investors shouldn't act solely on the basis of this recent insider buying - instead, it's just one factor to consider when evaluating these or any other stocks. But in each case, the buying stands out for its size or irregularity, which sometimes can be taken as a sign of insider optimism. SEE ALSO: 13 Best Stocks to Buy for the Next Stock Market Correction
BP plc (BP) sealed an estimated $9.61 billion worth of gas deal with a South Korean buyer, while ExxonMobil (XOM) signed an agreement to divest its oil and gas business in Norway for $4.5 billion.
(Bloomberg Opinion) -- As the fight for Marathon Petroleum Corp.’s future intensifies, collateral damage looms for an already battle-scarred asset class: master limited partnerships.Elliott Management Corp.’s call for splitting Marathon in three has garnered support from a couple of other shareholders now pushing CEO Gary Heminger to step down. Marathon’s board says it stands behind Heminger, but the persistent discount in the stock versus its sum-of-the-parts value should keep the issue of a corporate overhaul alive. While the future of retail arm Speedway looks like the most contentious area, Elliott’s suggestion of converting Marathon’s MLP, called MPLX LP, into a regular C-Corp and spinning it off looks less controversial.Such conversions have become commonplace. Problems with governance, debt, tax reform and general energy exposure have crushed MLP valuations, eroding their main reason for existing, namely as a cheap source of capital. MPLX now sports a distribution yield of about 9.5%. Converting to a C-Corp, as many others have done, would open up a wider pool of investors.That could be great for MPLX; less so for MLPs.I wrote here back in May about the shrinking MLP pool. Since then, a few partnerships have disappeared, including Andeavor Logistics LP, which was bought by MPLX. Meanwhile, Tallgrass Energy LP has received a buyout offer (of sorts), and Kinder Morgan Canada Ltd. should disappear by the end of the year. Plus, with Occidental Petroleum Corp. trying to pay off the debt from its acquisition of Anadarko Petroleum Corp., Western Midstream Partners LP also could be exiting the scene.Here are updated charts breaking down 83 North American energy infrastructure companies (not including utilities) into their respective groups, weighted by market cap and free float. The dominance of the C-Corps is pretty clear: An MPLX conversion would have a big impact. With a market cap of roughly $30 billion(1), MPLX represents about 11% of North American energy partnerships’ aggregate value. It’s also the largest member of the Alerian MLP Index. Assume MPLX converts and is spun off, plus Buckeye Partners LP(2), Tallgrass, Kinder Morgan Canada and Western Midstream all disappear. Under that scenario, C-Corps would jump from about 62% of the aggregate free float of energy infrastructure firms to more than two-thirds. Meanwhile, outside of C-Corps and the big four, we would be left with a long tail of 61 companies with a combined free float of just $48 billion, averaging less than $800 million each.And the dwindling ranks of the Alerian MLP index would thin further; MPLX, Tallgrass and Western Midstream account for a fifth of its weighting. The relative weighting of smaller partnerships with lower-quality midstream assets would increase. For example, all else equal, Genesis Energy LP, which houses everything from soda-ash production to pipelines to shipping, could enter the top 10 of the index’s holdings.A vicious cycle is at work here. As generalist investors have withdrawn, so MLP valuations have remained subdued despite some recovery in energy prices and continued growth in U.S. physical energy flows. This, along with governance concerns, persuades more partnerships to either sell out or give up on the structure, reducing the pool of available investments, which in turn leads to investment mandates and specialist funds migrating away.Earlier this month, large pension funds in Iowa and Oklahoma effectively eliminated asset allocations to MLPs, with Teachers’ Retirement System of Oklahoma noting a number of drawbacks, including an “extremely small universe of securities relative to other asset classes.” In his latest weekly roundup of the sector, Hinds Howard at CBRE Clarion Securities noted that after a year of trying to deal with weak performance and growing concentration, institutions are “throwing in the towel,” with allocations “being diverted to listed infrastructure strategies, private equity or just plain old global equities.” He adds:MLPs have lost the special designation as a separate allocation within real assets that the sector has enjoyed over the years. That fund flow headwind is the biggest impediment to midstream performance [for] the rest of 2019, especially if oil prices are going to remain a headwind.Of course, even if MLPs are shrinking in importance, the hard assets they own remain and can be invested in under other structures. BP Capital Fund Advisors LLC is touting the catchily named UBS E-TRACS NYSE Pickens Core Midstream Index ETN, which includes allocations to C-Corps, with a recent report subtitled: “Is your midstream exchange traded product still relevant?” Some funds have taken an holistic approach to energy infrastructure for years, notably the First Trust North American Energy Infrastructure Fund, which mixes partnerships with C-Corps and even utilities, and the Voya CBRE Global Infrastructure Fund, which extends beyond energy-related infrastructure.Looking at the relative performance, it isn’t hard to see why. And as more MLP constituents either change identity or leave altogether, more institutional money will follow.\- With graphics by Elaine He (1) All data are as at the market close on September 26, 2019.(2) IFM Investors agreed to buy Buckeye for $11.1 billion (including assumed debt) in May 2019, with completion expected by the end of the year.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Marathon Petroleum's (MPC) top brass reacts to Elliott's split bid stating that the company is in close touch with its shareholders and welcomes all suggestions to add shareholder value.
(Bloomberg Opinion) -- “Remaking Marathon” is the title of Elliott Management’s slide deck detailing its thoughts on oil refiner Marathon Petroleum Corp. “Unmaking Marathon” would be closer to the mark.Marathon is the quintessential target for Elliott (or any other activist): a conglomerate built through acquisitions that has struggled to convince the market it can make 1+1=3. Having traded at a premium to its peers just prior to announcing the $29 billion acquisition of West Coast refiner Andeavor, the stock has decoupled notably since the start of this year and now trades at a marked discount:Marathon also has history with Elliott, which pressed the company to split in 2016 but ultimately settled for the refiner beefing up and simplifying its master limited partnership, MPLX LP, and agreeing to a strategic review of its retail network, Speedway. Rather than shedding Speedway, Marathon doubled down on its integrated model with the Andeavor deal. With the promised synergies translating into a discount rather than a premium for the stock, Elliott is once again pressing for a split. Other activists such as DE Shaw & Co. LP and Third Point LLC also lurk on the shareholder register.As usual, Elliott touts huge potential gains if Marathon follows its playbook, up to $60 a share, more than double Tuesday’s closing prices and running to a cool $39 billion in market value. That is beyond blue-sky, of course, but the underlying argument is worth considering.Remaking MPLX as a C-corp and spinning it out is a no-brainer. Marathon’s MLP has a troubled history relating largely to the overpriced acquisition of MarkWest Energy Partners LP in 2015. It currently sports a yield of 9%, which rather undercuts the whole point of having an MLP. Converting it to a C-Corp. would widen the potential pool of investors, an established trend in MLP-land at this point, and for good reasons (see this). Distributing Marathon’s stake of almost two-thirds to shareholders would also remove a big overhang, increase liquidity and put some operating distance between the pipeline owner and its parent.Speedway would appear to be the real battleground, given Marathon resisted Elliott’s prior call to separate it. Marathon’s argument rested on its cost-saving fit with the refining business, diversification and concerns about the impact of a separation on its taxes and credit rating. In other words, the dis-synergies just weren’t worth it.The difficulty Marathon faces now rests largely on the fact that since announcing that decision in September 2017, its stock has underperformed both its peers and standalone fuel retail stocks such as Murphy USA Inc. and Canada’s Alimentation Couche-Tard Inc. And having taken on a lot of debt in the meantime to fund the Andeavor deal, Elliott’s proposal to use a Speedway spin-off to delever the refinery business seems likely to stir at least some interest on the part of Marathon’s investors. It’s not a buyback promise, but a cleaner balance sheet could lift some weight off the stock.Elliott may also see an opportunity here, timing-wise, with CEO and Chairman Gary Heminger up for re-election to the board next year. Next week also happens to mark Greg Goff’s one-year anniversary as executive vice-chairman, having joined after negotiating the sale of Andeavor, where he did a widely respected job as CEO and sold the company at a high price. Most of all, though, Elliott seems to be focused on the gap between the promise of that merger and the lack of tangible reward in Marathon’s stock. That alone should provide impetus for a shake-up. To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Moody's Investors Service ("Moody's") has withdrawn Andeavor Logistics LP's (ANDX) Baa3 senior unsecured rating. The withdrawal of ANDX's rating also concludes the review for upgrade upon which ANDX was initially placed on April 30, 2018. This action follows MPLX LP's (MPLX, Baa2 stable) completion of its offer to exchange MPLX senior notes for notes issued by ANDX.
Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Andeavor Logistics LP and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.