Where KNOP’s Earnings Margin Stands among Top MLPs
TTM EBITDA margin
KNOT Offshore Partners (KNOP), a Marine Transportation MLP (master limited partnership) involved in shuttle tankers business, ranks fifth among the MLPs with the best EBITDA (earnings before interest, tax, depreciation, and amortization) margins.
KNOP posted a TTM (trailing-12-month) EBITDA margin of 77.9% in 3Q17. KNOT’s high EBITDA margins have been driven by its low operating expenses, which include vessel operating expenses and general and administrative expenses.
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KNOT Offshore Partners’ strong EBITDA margins have driven its high net income margins and distributable cash flows. The partnership reported net income margin of 36.2% in 3Q17, but the partnership kept its distribution unchanged that quarter, despite its strong distribution coverage (1.46x).
Trend in recent quarters
KNOP’s EBITDA margin fell to 77.5% in 3Q17, compared with 79.9% in 2Q17 and 80.5% in 3Q16. This represents QoQ (quarter-over-quarter) and YoY (year-over-year) margin declines of 245 basis points and 303 basis points, respectively. The decline in partnership’s EBITDA margin is due to higher vehicle operating expenses.
Notably, 66.7% of the analysts surveyed by Reuters recommend a “hold” for KNOP, while 33.3% recommend a “buy.” KNOP’s average target price of $23.6 implies a ~17% upside potential from its current price level.
In the next part, we’ll check out TC PipeLines’ (TCP) EBITDA margin.