UPDATE: Credit Suisse Upgrades Enterprise Products Partners LP Following 2014 Analyst Day
In a report published Wednesday, Credit Suisse analyst John Edwards upgraded the rating on Enterprise Products Partners LP (NYSE: EPD) from Neutral to Outperform, and raised the price target from $71.00 to $78.00.
In the report, Credit Suisse noted, “We are raising our target price to $78 (from $71). A 1.5x distribution coverage at its current distribution growth trajectory and an investment of ~3-4x the capital to sustain that growth trajectory imply EPD has the ability to grow the distribution faster, or imply higher terminal growth rate vs most MLPs. Thus, applying a 3-stage DDM (~7%/ ~7%/2.75%) discounted at an 8.0% cost of equity capital takes us to $78 TP.
"With the 1.5x coverage, we calculate EPD could grow its distribution at 6% annually for the next 7 years with zero capital investment just by squeezing coverage. Put another way, our TP implies a ~5.75-6.0% yield on EPDs DCF/unit run rate for 4Q14 and a valuation range of $77-$80/unit for a total return of ~16%-21%, supportive of an Outperform.”
Enterprise Products Partners LP closed on Tuesday at $68.80.
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