GOLDMAN YELLING SELL ON MAGELLAN
INERGY HIKES (again)!
INERGY HIKES (again)!
Inergy Holdings (NRGP) leads the way with distribution hikes this morning making it 11 in a row. Inergy LP meanwhile makes it 26 consecutive quarters (6 1/2 yrs) of distribution hikes. Also scroll down and check last nights posts about other earnings and distribution increases. Targa Resources (NGLS) also takes its distribution higher for the quarter. More news headlines as they break.
Meanwhile Goldman Sachs is on the horn this morning as they downgrade Magellan Midstream Partners (MMP) to a sell which is something you don't see too often. They had it as a hold. The chart above shows MMP has been a pretty good relative performer and its been in a trading range between 38 and 45 for the last year or so. If i get the reasons behind the downgrade i will post. Or if any of you find out please post it in the comments section.
Earnings driving the overall market this morning. Crude is down 63 cents (which is against all natural law). Nat gas is a little lower. Stock futures a little lower.
joseph cioffi's Source Page - Associated Content
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Magellan Midstream Partners (MMP) Sell: Adding MMP to Americas Sell List on relative valuation April 23, 2008
Source of opportunity
We are adding Magellan Midstream Partners to the Americas Sell List as valuation has become expensive relative to its peer group. The partnership currently trades at a 107 bp yield premium to other Pipeline MLPs despite our only slightly above average 12-month distribution growth forecast of 9.5%. We estimate unit prices would need to drop 3% in order to recouple with our 6.3% company-specific yield. We recommend investment in Neutral-rated Magellan GP (MGG) for those interested in MMP’s assets, as the 100 bps lower yield (5.1% vs. 6.1%) is easily offset by MGG’s more compelling distribution growth profile (19% over next 12 months).
Catalyst
We are downgrading MMP to Sell (from Neutral) on relative valuation as unit prices trade at a 107 bp yield premium to other Pipeline MLPs despite our marginally above average 12-month distribution growth forecast. Over the last 12-months, MMP has become more expensive on several relative valuation measures: (1) its yield is currently 100 bps below the Pipeline MLP group average versus an average 75 bps over the last 12-months, (2) its current 6.1% yield ranks it as the most expensive name in our coverage universe, excluding asset selldown-themed MLPs. There is no change to our favorable view on company fundamentals or our 2008-2010 earnings/distribution forecast.
Valuation
There is no change to our 6-month target price of $44 (5% total return), supported by our 12-month distribution growth forecast of 9.5% and 6.3% MMP company-specific yield, a premium to our group average yield forecast of 6.75%.
Key risks
Interest rates impact MLP sector valuation.
well, Goldman got their 3% today. time for a upgrade now -:)
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