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How Mid-Cap and Large-Cap MLPs Performed in 2Q17

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Part 8
How Mid-Cap and Large-Cap MLPs Performed in 2Q17 PART 8 OF 10

What Drove Phillips 66 Partners’ Strong EBITDA Growth in 2Q17?

PSXP posts 62.2% EBITDA growth in 2Q17

Phillips 66 Partners (PSXP), the midstream MLP formed by one of the US’s largest refiners, Phillips 66 (PSX), reported its 2Q17 earnings on August 1, 2017. The partnership’s 2Q17 EBITDA rose to $103 million in 2Q17 compared to $105 million in 2Q16, a YoY jump of 62.2%. Moreover, PSXP beat its 2Q17 EBITDA estimate by 2.7%. The partnership’s strong earnings growth was driven by lower operating expenses and “increased volumes on the Sand Hills and Explorer pipelines” as noted in the 2Q17 earnings release.

 What Drove Phillips 66 Partners’ Strong EBITDA Growth in 2Q17?

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PSXP’s distribution rose 5% in 2Q17

PSXP declared a distribution per unit of $0.62 for 2Q17. This represents a 5% increase compared to the previous quarter and a 21.7% increase compared to the corresponding quarter last year. According to Greg Garland, PSXP’s CEO, “We continue to advance several organic growth projects to support our goal of achieving $1.1 billion of run-rate EBITDA and a 30 percent five-year distribution CAGR by the end of 2018.”

Analysts’ recommendations

68.8% of analysts rate PSXP a “buy,” 25% rate it a “hold,” and the remaining 6.2% rate it a “sell” as of August 7. The partnership was recently upgraded by Barclays to “overweight,” which is equivalent to a “buy.” PSXP has seen two rating updates since the beginning of this year and both were upgrades. PSXP’s average target price of $59.4 implies ~25% returns from its current price levels.

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