UPDATE: Wunderlich Initiates Coverage on Lehigh Gas Partners
In a report published Wednesday, Wunderlich Securities analyst David Askew initiated coverage on Lehigh Gas Partners (NYSE: LGP) with a Buy rating, establishing a $32.00 price target.
According to the report, the analysts believe LGP is well positioned for a solid 12.8 percent distribution growth in 2014 on the back of strong but potentially normalizing wholesale fuel margins, an active acquisition strategy, above-trend distribution coverage and a conservative balance sheet with ample dry powder and no near-term equity needs.
“LGP is also a derivative play on growing US oil production to the extent it manifests in lower retail gasoline prices, which typically boost margins,” the report noted. “We believe investors should buy the units, which offer an attractive balance of discounted yield and growth, ahead of expected strong results in 4Q13 and 2014. Our $32 price target implies a 12-month total return of 20% and a 7.0% target yield.”
Some key points from the report included:
-Lower gasoline prices driving strong fuel margins -Demonstrated acquisition strategy drives growth -Balance sheet and coverage support expansion
LGP closed Tuesday at $28.56.
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