Barclays Adjusts Estimates On Sunoco, Other MLPs
Barclays’ Heejung Ryoo revised the earnings projections for three US MLPs. The analyst has Equal-Weight ratings on all three stocks - Sunoco LP (NYSE: SUN), Holly Energy Partners, L.P. (NYSE: HEP) and Delek Logistics Partners LP (NYSE: DKL), with price targets of $32, $35 and $32, respectively.
Analyst Heejung Ryoo reduced the EBITDA estimates for 2Q16 and 2016 from $184.5mm to $180.5mm and from $742.3mm to $735.3mm, respectively, to reflect updated margin and operating cost assumptions as well as contribution from recent acquisitions.
Ryoo expects Sunoco’s margins to contract sequentially in 2Q, due to the rise in gasoline prices. “Slightly mitigating the margin headwind is 8 days of contribution from the Valentine and Rattlers acquisitions.”
Holly Energy Partners
The EBITDA estimates for 2Q16 and 2016 have been raised from $59.6 mm to of $66.0mm and from $260.3mm to $281.5mm, respectively, to reflect updated volume and tariff assumptions as well as the acquisition of the Cheyenne pipeline interest in June.
“Looking to 2H, HEP will likely see a headwind from a negative FERC escalator this year beginning in 7/1 (-1.9%), but the partnership has provisions in its contractual agreements that mitigate the effect. We continue to expect the drop down of the Woods Cross expansion assets in 2H. We forecast that the drop down size will be $200mm,” the analyst wrote.
Delek Logistics Partners
The EBITDA estimate for 2Q16 has been reduced from $25.7mm to $25.4mm, while the estimate for 2016 has been raised from $96.5mm to $100.2mm. The new estimates reflect higher pipeline volumes in the back half of the year, offset partly by lower tariffs.
“We expect the partnership to report sub-1x coverage in 3Q given headwinds of a negative FERC escalator as well as lower committed volumes and 40 days of hydro-testing on the Paline Pipeline,” Ryoo stated.
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