Credit Suisse Downgrades Plains All American As 'Outlook Goes From Bad To Worse'

• Plains All American Pipeline, L.P. PAA reported its third-quarter results on Tuesday, beating estimates on the earnings front, but missing them on the revenue front.
• The most discussed issue were the additional cutbacks in its outlook, continuing with the trend seen in the second quarter.
• On the back of the light guidance, analysts at Credit Suisse downgraded the stock to Neutral and trimmed their price target by $8 to $38.

In a report issued Thursday, analysts at Credit Suisse downgraded Plains All American Pipeline to Neutral on the back of the soft guidance the management provided on Tuesday.

They explain that, “Management indicated that with having scaled asset additions for growth and now facing volume declines, certain regions now have too much pipe and not enough volumes, specifically crude producing shale plays such as the Eagle Ford and parts of the Permian.” The team lowered its fourth-quarter adjusted EBITDA guidance by about 13 percent and reiterated its outlook for “a tough 2016 in terms of volumes and margins.”

Credit Suisse’s Take

The experts again cautioned investors from applying management's gloomy outlook to midstream companies that are not primarily focused on crude, since the Utica/Marcellus and other gas plays “still have several years of project backlogs to fill before even approaching overbuilt status.”

On top of downgrading Plains All American Pipeline, the firm also trimmed its price target for Plains GP Holdings LP PAGP by $6 to $20.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.