Stifel Upgrades NGL Energy Partners To Buy

Stifel analysts, Selman Akyol, Tim Howard, and Cory Prott, believe that NGL Energy Partners LP NGL is well-positioned to realize Grand Mesa cash flows and optionality increased considerably after its recent deleveraging events. Aside from that, the strong fourth quarter results and the management's reiteration of outlook for the fiscal year 2017 were enough for them to upgrade the shares of the company to a Buy rating from Hold. The three analysts have also established their price tasrget of $18.00. Changes In Outlook/Model The brokerage said that NGL Energy Partners' Management provided high level segment guidance that it utilized to modify its FY17 estimates. The analysts have their estimates in line with management's expectations mostly. That included reducing its Liquids and Retail Propane segments, while boosting its Crude Logistics estimates. With that said, the analysts' opined, "we remain below management's guidance for Crude Logistics as we believe NGL's base crude business will continue to be challenged in this environment. Our Grand Mesa estimates are in line with a FY17 contribution of approximately $50 million. In turn, our estimates continue to be conservative in relation to management's guidance which could provide upside." Enough Steps Taken For Viable Future Stifel analysts think that though concerns remained with NGL's marketing-centric business model, they believe that the management has taken sufficient steps for a viable future. The analysts pointed out that with the Grand Mesa pipeline on line in November 2016 and the partnership's $423 million of EBITDA realized during a difficult FY16, NGL Energy Partners should be able to significantly boost its distribution, while maintaining ample coverage. The brokerage added, "When coupled with current valuation, we believe units of NGL offer an attractive investment… While we are upgrading to Buy, an investment with NGL is accompanied by incremental risk given its marketing-based cash flows that conservative investors may want to consider." The stock traded 7.43 percent higher on Thursday.
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