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Will Navios Partners’ 3Q15 Distribution Cut Spur Future Growth?

PART:
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Part 6
Will Navios Partners’ 3Q15 Distribution Cut Spur Future Growth? PART 6 OF 7

What Do Analysts Recommend for Navios Partners?

Analyst ratings

Navios Maritime Partners (NMM) has “buy” recommendations from 17% of analysts covering the stock, “hold” recommendations from 58%, and “sell” ratings from 25%. As compared to this, Scorpio Bulkers (SALT) has “buy” ratings from 77% of analysts covering the stock and “sell” ratings from only 8% of analysts. Ship Finance International (SFL) has “buy” ratings from 75% of analysts and no “sell” ratings. Navios Maritime Holdings (NM) has “buy” recommendations from 63% of analysts and “sell” ratings from 12% of analysts.

The Yorkville High Income MLP ETF (YMLP) has 6% of its holdings in Navios Partners.

What Do Analysts Recommend for Navios Partners?

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Rating changes

J.P. Morgan, which had an initial rating on Navios Partners in September 2015 of “underweight,” upgraded it to “neutral” and raised the target price to $6 from $5 after its 3Q15 results release. J.P. Morgan believes that the stock’s further downside is limited.

Deutsche Bank, on the other hand, maintained its “buy” rating, but cut its target price from $15 to $8.5, reflecting the lower distribution yield. Clarksons Platou cut its target price from $9 to $6 while maintaining its “neutral” rating.

Bank of America Merrill Lynch reiterated its “underperform” rating while cutting the target price to $6 from $10. The firm remains cautious on the dry bulk shipping outlook given demand and supply dynamics.

Analyst estimates

Analysts are estimating sales of $226.9 million for 2016 and EBITDA (earnings before interest, tax, depreciation, and amortization) of $157.3 million. This is lower than its figures in 2014 as the graph above shows. This is despite the acquisition of container vessels during late 2014 and 2015. Analysts are most likely factoring in the risk of recharter for NMM’s dry bulk vessels. Navios Partners’ 15 dry vessels are coming off charter until June 2016. Given the current state of the dry bulk market and tepid outlook, the re-chartered rates on these vessels are expected to be lower than the rates at which the current charters will expire. This could lead to a downside on the company’s EBITDA and operating surplus.

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