UPDATE: Citigroup Raises PT on Magellan Midstream Partners on Positive Outlook

In a report published Wednesday, Citigroup analyst John K. Tysseland reiterated a Buy rating on Magellan Midstream Partners MMP, and raised the price target from $55.00 to $62.00.

In the report, Citigroup noted, “We maintain our Buy recommendation and forward estimates as we believe MMP's largely fee-based businesses, growth projects/opportunities, and financial flexibility allow it to provide mid-teens distribution growth for the next couple of years despite a diminishing crude spread environment. Recently, crude differentials have collapsed as new pipeline infrastructure comes online, causing investors to take pause and reassess crude-related MLPs. However, MMP's crude related businesses are mostly fee-based in nature and wide crude differentials havenot played a large part in its growth. As a result, we don't expect margins to experience any substantial declines as spreads contract. In fact, we believe that increasing throughput on Longhorn and the start-up of BridgeTex next year will support mid-teens distribution growth despite diminishing spreads. In addition, MMP has managed to grow the volumes in its largest operation segment via strategic acquisitions such as the recent Texas-New Mexico pipeline transaction, despite the continued structural declines being seen in national refined product volumes.”

Magellan Midstream Partners closed on Tuesday at $54.72.