Market Overview

Williams Companies And Other MLPs Favored by Credit Suisse

A new report from Credit Suisse not only recommends buying shares, but also increased the firm's price targets on some master limited partnerships in the wake of their recent strong earnings reports.

Below we take a glance at how Magellan Midstream Partners (NYSE: MMP), Targa Resources (NYSE: TRGP) and Williams Companies (NYSE: WMB) have fared and what analysts expect from them.

But note that Credit Suisse also raised its price targets on Targa Resource Partners (NYSE: NGLS) and Enterprise Products Partners (NYSE: EPD), though a Neutral rating was maintained on the latter.

See also: Citigroup Raises PT On Magellan Midstream Partners On Positive Outlook

Magellan Midstream Partners

This Tulsa, Oklahoma-based company sports a market capitalization of less than $13 billion. Its dividend equivalent yield is about 3.8 percent. Its return on equity is more than 30 percent, and the operating margin is greater than the industry average. The long-term earnings per share (EPS) growth forecast is about 10 percent.

The short interest in this petroleum transportation and storage company was less than one percent of the float as of the July 15 settlement date, though that was highest number of shares sold short so far this year. The days to cover rose to about three for the first time since last September.

The consensus recommendation of the analysts surveyed by Thomson/First Call is to hold shares, and it has been for at least three months. Their mean price target, or where the analysts think the share price will go, is only marginally higher than the current share price. However, the Credit Suisse price target indicates more than 15 percent potential upside.

The share price is up more than 25 percent since the beginning of the year and hit a new multiyear high Thursday. Over the past six months, the stock has outperformed competitors Dynegy (NYSE: DYN) and Kinder Morgan (NYSE: KMI), but it has underperformed the S&P500.

Targa Resources

This provider of midstream natural gas and natural gas liquid services has a market cap near $9 billion and a distribution yield of about 3.1 percent. The long-term EPS growth forecast is about 22 percent, and the return on equity is almost 30 percent. But the price-to-earnings (P/E) ratio is greater than the industry average.

The short interest in this Houston-based company was more than two percent of the total float at mid-July. That was the highest number of shares sold short since March, after rising about eight percent from the previous period. The days to cover rose to more than four, also for the first time since March.

Nine of the 13 analysts surveyed recommend buying shares, and none of them recommends selling. And the analysts think shares have some head room, as their mean price target is almost seven percent higher than the current share price. But the new Credit Suisse price target indicates about 19 percent potential upside.

The share price is up more than 26 percent year-to-date, and it reached a new multiyear high on Thursday. Over the past six months, the stock has outperformed competitors Enterprise Products Partners and ONEOK Partners (NYSE: OKS), as well as the Dow Jones Industrial Average.

See also: Everything in Moderation, Dearie: Avoiding The Pitfalls Of Overdiversification

Williams Companies

This energy infrastructure company is also headquartered in Tulsa, Oklahoma, and it has a market cap of more than $24.5 billion. Its distribution yield is near 4.2 percent. The long-term EPS growth forecast is about 16 percent, and the return on equity is more than 15 percent.

The number of shares sold short as of the most recent settlement date represented less than three percent of the total float, after dropping marginally from the previous period, on the lowest average daily volume in a year. But the days to cover rose from about two to about four.

Of the 15 analysts polled, 12 recommend buying shares, with three of them rating shares at Strong Buy. The mean price target indicates that the analysts see about nine percent upside potential. But the new Credit Suisse price target is more than 36 percent higher than the current share price.

The share price popped more than six percent this week, and it is up about 14 percent from a year-to-date low in June. Because of this week's rise, Williams Companies has outperformed the likes of Dynegy and Kinder Morgan over the past six months, though it has underperformed the broader markets.

Posted-In: dynegy Enterprise Products Partners Kinder Morgan magellan midstream partners oneok partners Targa Resource Partners targa resourcesTrading Ideas Best of Benzinga

 

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