Why 63% of Analysts Recommend ‘Buys’ on PSXP
Of the analysts surveyed by Reuters, 63% rated Phillips 66 Partners (PSXP) as a “buy,” and 31% rated it as a “hold.” 6% of the surveyed analysts rated PSXP as a “sell.” Analysts’ median target price for PSXP for the next year is $56.
PSXP is currently trading near $51. If the stock achieves its target price, it will mean a 10% return for investors.
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The above graph shows analysts’ recommendations for PSXP. On January 12, 2017, Jefferies cut its price target for PSXP to $50 with a “hold” recommendation. On January 3, 2017, Deutsche Bank raised its price target for PSXP from $55 to $62.
In comparison, 81% of analysts rated Tesoro Logistics (TLLP) as a “buy,” and 76% rated Valero Energy Partners (VLP) as a “buy.”
Recent acquisitions made by Phillips 66 Partners coupled with reasonable leverage could boost PSXP’s growth in the near future.
In the partnership’s 3Q16 earnings release, Greg Garland, its chair and CEO, said, “In the quarter, we formed the STACK joint venture, increased our ownership in the Explorer Pipeline and progressed the eastern leg of Bayou Bridge Pipeline.”
He added, “Additionally, the October acquisition of crude, product and NGL logistics assets from Phillips 66 increased our run-rate EBITDA to approximately $580 million. We remain on track to achieve $1.1 billion of run-rate EBITDA by the end of 2018.”
PSXP is currently trading at a distribution yield of nearly 4.2%. However, PSXP’s expected 30% CAGR (compound annual growth rate) for distributions from the last quarter of 2013 through 2018 could boost its yield in the future.