Enterprise Products Partners: Captain Kirk Beams Up MLPs Again
Enterprise Products Partners reported results this past week that felt like a mixed report card, but the top MLP closed up on the week with a price of $34.22 on Friday (and with a yield-equivalent of about 4.5%). It was reiterated as Outperform with a $41 price target at Credit Suisse on Friday. The Credit Suisse report said:
Enterprise’s solid performance this quarter was an apt demonstration of how EPD can use its interconnected asset footprint to prosper despite very difficult market conditions. The solid performance prompts us to raise our EBITDA and DCF estimates in 2015 and 2016 by 2% and 1%, respectively, though we could easily justify a bigger increase if we extended margins from this quarter out in the future. We continue to forecast 1.4 to 1.5 times distribution coverage over the next four years, easily supporting our approximate 5% to 7% distribution growth trajectory.
Merrill Lynch was much more positive in its reiterated Buy rating. The firm has a $43 price objective and said:
Enterprise noted that it currently has over $6 billion worth of projects currently under construction and this morning, announced a new joint venture with Occidental Petroleum. … We believe the majority of Enterprise’s growth backlog is committed and do not see risk of a reduction in the $6 billion in projects underway, even in a lower commodity environment. … We continue to believe EPD’s distribution growth trajectory will remain unchanged, bolstered by a robust growth backlog and comfortable distribution coverage.
Marathon Oil: Turnaround Crosses the Rubicon?
Marathon Oil was reiterated as Outperform at Credit Suisse this past Monday, and the price target was raised to $36 from $32 in the call. Shares were at $30.33 at the time of the call, and the firm warned that this coming week’s earnings likely will be tough but gave potentially significant long-term share price upside to its above-consensus targets. Credit Suisse has Marathon as a Focus List stock, and the report said:
In recent weeks, it seems Marathon is finally getting some credit for the deep inventory of high return shale locations that they outlined in September last year. That update was overshadowed by a few small gyrations in the oil market. In our prior reports, we’ve highlighted the value in Marathon’s Oklahoma resource. However, recent wells have driven even more interest in this emerging play. … Downspacing and/or productivity improvements could add up to a further $12/sh. First quarter results (due May 6) will be tough; we forecast a $0.53 EPS LOSS and a large outspend. However, as oil markets rebalance, Marathon has the shale inventory to succeed.
Another new call late in the prior week came from Nomura Securities. The firm started Marathon with a Buy rating and gave a price target of $36.00, based on it being past the halfway point of its restructuring effort. Marathon closed out the week at $30.77, with close to a 3% dividend yield. It has a 52-week range of $24.28 to $41.92 and a consensus price target of $32.64.
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