X
<

PAA’s Potential Distribution Cut: Are MLPs Recovering?

PART:
1 2 3
Part 3
PAA’s Potential Distribution Cut: Are MLPs Recovering? PART 3 OF 3

Why PAA Is Facing Price Target Cuts, Downgrades

PAA rating updates

Plains All American Pipeline (PAA) has received numerous price target cuts now that it has lowered its guidance and announced a potential distribution cut. On August 8, 2017, Credit Suisse cut PAA’s price target from $33 to $29. On the same day, Stifel cut PAA’s price target from $30 to $26.

On August 9, Raymond James cut its price target for Plains All American from $30 to $24. It has now given an “outperform” rating to PAA. On the same day, Barclays cut its price target for PAA to $28 from $31.

Why PAA Is Facing Price Target Cuts, Downgrades

Interested in ETE? Don't miss the next report.

Receive e-mail alerts for new research on ETE

Success! You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success! has been added to your Ticker Alerts.

Success! has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

Other target cuts

Morgan Stanley has cut PAA’s target price to $25 from $32 and has downgraded PAA from “overweight” to “equal weight.” RBC has cut PAA’s target price to $20 from $29, while Suntrust Robinson has cut its price target for PAA to $23 from $33 and has provided a “hold” rating on the stock.

Notably, ~44% of the analysts surveyed by Reuters have rated PAA stock as “buy,” and the remaining ~56% rated it as a “hold.” The median target price for PAA is now $26.5. This target price implies a 28% upside from PAA’s current price of $20.67.

By comparison, ~65.0% of analysts have rated Energy Transfer Equity (ETE) a “buy,” and ~81.2% of analysts rated Energy Transfer Partners (ETP) a “buy.”

Moody’s review

Credit rating agency Moody’s has now put Plains All American Pipeline’s Baa3 rating under review for a downgrade. “The review for downgrade of Plains’ ratings reflects the continued challenges in its operational performance as evidenced by the continued failure to meet EBITDA [earnings before interest, tax, depreciation, and amortization] guidance and the need to revise guidance down for both 2017 and 2018,” said Terry Marshall, Moody’s Senior Vice President.

Moody’s sees uncertainties in PAA’s “basic operating performance” as a key factor impacting PAA’s rating.

Fitch downgrades PAA

On August 10, 2017, rating agency Fitch downgraded Plains All American Pipeline’s long-term IDR (issuer default rating) to “BBB-” from “BBB.” It also downgraded PAA’s short-term IDR and commercial paper ratings to “F3” from “F2.” The rating agency expects PAA’s leverage to remain “sustainable over 4.5x through 2018.”

For an analysis of Energy Transfer Partners’ (ETP) and Energy Transfer Equity’s (ETE) 2Q17 earnings, check out Market Realist’s Analyzing ETE and ETP’s 2Q17 Earnings.

X

Please select a profession that best describes you: