UPDATE: J.P. Morgan Upgrades Energy Transfer Partners Following SXL GP Transaction

In a report published Thursday, J.P. Morgan analyst Jeremy Tonet upgraded Energy Transfer Partners ETP from Neutral to Overweight, and raised the price target from $52.00 to $58.00.

In the report, J.P. Morgan noted, “After the close yesterday, ETE and ETP announced the exchange of ~50.16mm ETE owned ETP common units for 50% of the underlying economics in the SXL GP/IDRs via newly created Class H units. In addition, the Class H units will entitle ETE to $329mm in additional cash distributions over 15 quarters, intended to offset previous IDR subsidies. Through decreasing units outstanding by over 13% (and extinguishing the associated IDR drag), ETP is now positioned to resume distribution growth; mgmt guided to $0.01/unit increases in both 3Q13 and 4Q13 with the expectation of continued growth in 2014 (ETP guided to $0.25-0.30/unit of annual accretion, ~8.4%). We believe the resumption of growth will drive a revaluation for ETP, with the corresponding yield compression driving attractive price appreciation.”

Energy Transfer Partners closed on Wednesday at $51.11.