Yahoo Finance Why Are Analysts Bullish on Phillips 66 Partners after 1Q16?
Phillips 66 Partners' 1Q16 Results: Set for Long-Term Growth?
Analyst recommendations
Of the analysts surveyed by Bloomberg, ~73% rate Phillips 66 Partners (PSXP) a “buy,” and ~27% rate it a “hold.” None of the analysts rate it a “sell.” The consensus target price for PSXP is $71. Its shares are currently trading at $57.24. If the MLP hits this target price within a year, it would mean a 24% price return for investors. The table below shows the latest recommendations and target prices for Phillips 66 Partners. PSXP forms ~3% of the Global X MLP ETF (MLPA).
As for PSXP’s peers, 73% rate Tesoro Logistics (TLLP) a “buy,” and 75% rate PBF Logistics (PBFX) a “buy.” In comparison, 43% rate Holly Energy Partners (HEP) a “buy.”
It’s interesting to note that of the seven analysts that rated the stock after the 1Q16 results, all of them rated Phillips 66 Partners a “buy.”
Outlook for PSXP
Phillips 66 Partners expects ~$25 million in annual EBITDA (earnings before interest, tax, depreciation, and amortization) from the Sweeny NGL fractionator and associated storage caverns acquired in March 2016.
The company has several ongoing growth projects under development. When operational, they will contribute to earnings. Phillips 66 Partners has multiple long-term, fee-based agreements with Phillips 66 (PSX), with minimum volume commitments. It’s also expected to benefit from several planned growth projects at Phillips 66.
Phillips 66 Partners targets a five-year annual distribution growth rate of 30% through 2018. It has consistent distribution growth, a strong coverage ratio, and relatively comfortable leverage levels. PSXP’s expected growth from its investments in capital projects, contributed by a good droppable inventory of assets from PSX, makes it an MLP to watch.
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