Why Baird Is Upgrading NGL Energy Partners

In a report published Tuesday, analysts at Baird upgraded NGL Energy Partners LP NGL to Outperform. The price target has been maintained at $34. The company raised its guidance for FY2015 and FY2016, following a tough year. Although NGL Energy Partners has increased its EBITDA guidance for FY2015 and FY2016, the company has not quantified the potential upside. "Parsing previous commentary for clues, we suspect contango conditions, increased traction in Water (piped volumes, solid disposal projects), and ongoing TLP integration underpin management's out-period confidence," the analysts said. The analysts expect positive 1Q15 results, driven by better propane and crude margins. Upside could also be driven by contango capture, as well as continued synergy realization for TLP. Baird has also expressed its optimism regarding the viability of the Grand Mesa project, with 550 miles of pipe being purchased on April 23. While the analysts prefer to maintain a cautious stance on crude, they believe that the risk has also been factored into the stock valuation.