Merrill Lynch Raises Price Targets on Top Buy-Rated Energy and MLP Stocks

By Lee Jackson Updated Jan 13, 6:31AM EST · Published Jun 22, 11:05AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Merrill Lynch Raises Price Targets on Top Buy-Rated Energy and MLP Stocks — © Thinkstock

[cnxvideo id=”655416″ placement=”ros”]With the spot price of oil holding its own, and many strategists and economists positive on gross domestic product growth in the second half, there is a good chance that any huge drop in oil is probably out of the question. Despite the fact that oil has had an outstanding run off the lows from February, and it could move sideways for some time to consolidate the gains of the past four months, further upside later in 2016 and next year is a definite possibility.

Merrill Lynch has raised price targets on many of the stocks in its energy and master limited partnership (MLP) coverage universe, even on the stocks not rated Buy. We screened the list and found three rated Buy that look very attractive now.

Anadarko Petroleum

This top stock is still down a stunning 52% since the highs printed in 2014. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs).

The Midstream segment provides gathering, processing, treating and transportation services to Anadarko and third-party oil, natural gas and NGLs producers, as well as owns and operates gathering, processing, treating and transportation systems in the United States. The Marketing segment markets oil, natural gas and NGLs in the United States; oil and NGLs internationally; and anticipated liquefied natural gas production from Mozambique.

The company’s asset portfolio includes U.S. onshore resource plays in the Rocky Mountains, the southern United States, the Appalachian basin and Alaska; the deepwater Gulf of Mexico; and in Mozambique, Algeria, Ghana, Brazil, Colombia, Côte d’Ivoire, Kenya, Liberia, New Zealand and other countries. As of December 31, 2014, it had approximately 2.9 billion barrels of oil equivalent of proved reserves.

Anadarko investors receive a miniscule 0.38% dividend. The Merrill Lynch price target was raised from an already big $85 to $95. The Thomson/First Call consensus price objective is much lower at $64.39. Shares closed most recently at $55.51.

[nativounit]

Magellan Midstream Partners

This is a top midstream MLP company that checks in high on the distribution list. Magellan Midstream Partners L.P. (NYSE: MMP) primarily transports, stores and distributes refined petroleum products and crude oil. The partnership owns the longest refined petroleum products pipeline system in the country, with access to nearly 50% of the nation’s refining capacity, and can store more than 95 million barrels of petroleum products, such as gasoline, diesel fuel and crude oil.

The company sports a BBB+ credit rating from S&P, and the outlook is listed as stable. One main reason for the very positive ratings is that almost 85% of Magellan Midstream’s operating margin is protected by long-term, fixed-fee contracts, meaning that its cash flow is not just recurring but is highly predictable and also largely immune from energy prices. This helps to keep the distribution safer.

Magellan investors are paid a 4.67% distribution. The Merrill Lynch price objective moves to $79 from $75, while the consensus price target s $77.18. Shares closed Tuesday at $75.45.

RSP Permian

This company was one of the production growth leaders in the last half of 2015 and into 2016. RSP Permian Inc. (NYSE: RSPP) is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The vast majority of the company’s acreage is located on large, contiguous acreage blocks in the core of the Midland Basin, a sub-basin of the Permian.

The company caught a string of upgrades from top Wall Street companies during the spring, and many have pointed to the possibility that the company may very well be a potential takeover candidate.

The Merrill Lynch price target was raised to $41 from $35, while the consensus figure is at $37.90. The stock closed Tuesday at $35.04.

[wallst_email_signup]

These three outstanding companies continue to be favorites across Wall Street. Again, it is important to remember that the distributions from the MLPs may contain return of capital.

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.