Energy MLPs Have Been Destroyed, and Analyst Has 4 to Buy Now

By Lee Jackson Published Jul 24, 10:15AM EDT

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Face it, if you are an energy investor, especially in the master limited partnerships (MLPs), this has been a very cruel summer. The Alerian MLP index is off a stunning 14% since June 1. All the chatter from the financial talking heads is negative, oil prices have plummeted, there is blood in the streets. That is exactly when it is time to consider a little buying.

A new research report from Jefferies acknowledges that things have been grim, and uncertain commodity pricing looking out the rest of this year and into 2016 is still a jump ball. However, the firm has totally reviewed the analysts’ thesis and models for the companies they cover and feels that the last half of 2015 and next year should be at least modestly constructive.

We screened the Jefferies universe for high-quality companies that are rated Buy. We also looked for companies in which the Jefferies team did not lower the price targets. Four jumped out at us.

Enterprise Products Partners

This company is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) once again, despite the energy slump, just raised its distribution by 1%. It maintains a very good long-term position in the market, and provides many of its services on the basis of long-term, fixed-fee contracts, insulating against some of the wilder swings of the commodities that it trades in.

ALSO READ: 5 Long-Term Opportunities Forming in MLPs

Enterprise investors are paid very solid 5.55% distribution. The Jefferies price target is $36. The Thomson First Call consensus target is higher at $39.83. Shares closed Thursday at $27.41.
Plains All American Pipeline

This is another top stock on Wall Street that has had the power to withstand the downturn and come back. Plains All American Pipeline L.P. (NYSE: PAA) owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids (NGLs), natural gas and refined products. The company owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL-producing basins and transportation corridors and at major market hubs in the United States and Canada.

The company also has one of the largest storage asset bases, with over 120 million barrels of liquids storage capacity at the three major hubs in Cushing, Okla.; Midland, Texas; and Patoka, Ill.

Investors are paid a very sizable 7.04% distribution. The Jefferies price target is posted at $54, and the consensus target is slightly higher at $56.30. Shares closed Thursday at $39.56.

ALSO READ: 3 Oil and Gas Stocks Analysts Want You to Buy Now

Sunoco Logistics Partners

This company just raised the distribution 5% for the 13th consecutive quarter. Sunoco Logistics Partners L.P. (NYSE: SXL) owns and operates a logistics business consisting of a geographically diverse portfolio of complementary crude oil, refined products and NGLs pipeline, terminalling and acquisition and marketing assets, which are used to facilitate the purchase and sale of crude oil, refined products and NGLs. The company’s general partner is a consolidated subsidiary of Energy Transfer Partners.

Investors are paid a 4.83% distribution. The Jefferies price objective is $46, and the consensus target is $50. The shares closed Thursday at $34.72.

Targa Resources Partners

The company was formed in October 2006 by its parent, Targa Resources, to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets. Targa Resources Partners L.P. (NYSE: NGLS) is a leading provider of midstream natural gas and NGLs services in the United States, with a growing presence in crude oil gathering and petroleum terminalling. The MLP is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling NGLs and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminalling crude oil; and storing, terminalling and selling refined petroleum products.

Shareholders are paid a monster 8.74% distribution. The Jefferies price objective is $45, but the consensus target is $50. The shares closed most recently at $37.56.

ALSO READ: With Natural Gas Demand Growing, 4 Preferred Stocks to Buy

It is important to remember that MLP distributions can contain return of capital. You have to buy when sentiment is bad; you are almost forced to add a little when it is this bad. We recently had a look at some additional MLP opportunities.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.