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MPLX: On Track to Meet 29% Distribution Growth Target for 2015

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Jan. 13 2016, Updated 12:06 p.m. ET

MPLX’s expected distribution growth

MPLX LP (MPLX) announced its distribution growth target of 29% for 2015 in April 2015. It increased distributions in each of the first three quarters of 2015 by ~7%. It should meet its target for 2015 if it increases its 4Q15 distributions by a minimum of 6.4%.

MPLX targets a CAGR (compound annual growth rate) of 25% through 2017. It targets an annual distribution growth of ~20% in 2018 and 2019. MPLX forms ~8.3% of the Alerian MLP ETF (AMLP), which holds top infrastructure MLPs.

Referring to MPLX’s earlier distribution growth guidance through 2019, Gary R. Heminger, the company’s chairman and CEO, noted in the 3Q15 earnings release, “We remain committed to the growth profile provided in that guidance.”

He added, “Given the significant change in MLP valuations and the resultant higher yield environment the sector has experienced recently, we now expect dropdown transactions or some form of sponsor support as early as 2016.” MPLX is an MLP formed by Marathon Petroleum Corporation (MPC) in 2012.

MPLX’s distributable cash flows increased 60% year-over-year in 3Q15 from $33 million to $52 million. During the first nine months of 2015, MPLX made capital expenditures of ~$140 million. In February 2015, the company announced a capital plan of $260 million for 2015.

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MPLX’s price targets

The median target price for MPLX in a year provided by the analysts surveyed by Bloomberg is $49.50. The low and high target price for the stock over the same period is $37 and $64, respectively. The median target price implies a 51% price return in a year from MPLX’s current price of $32.72.

About 70% of the analysts surveyed have rated MPLX a “buy,” while 30% have rated it a “hold.” None of the analysts have rated it a “sell.”

As for other midstream companies, 50% rated Spectra Energy (SE) a “buy,” and 50% rated Enbridge Energy Partners (EEP) a “buy.” About 25% of the analysts surveyed rated ONEOK (OKE) a “buy.”

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