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PAA’s 2016 Outlook Is Uncertain, 60% of Analysts Rate It a ‘Hold’

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Plains All American’s one-year fall

Plains All American Pipeline (PAA) generated total returns of -62% over the last 12 months. In comparison, Magellan Midstream Partners (MMP), Sunoco Logistics (SXL), and Enbridge Energy Partners (EEP) generated total returns of -21%, -57%, and -54%, respectively, during the same timeframe. The Alerian MLP ETF (AMLP) generated total returns of -44% over the past year. For more on the stock’s huge fall, read Plains All American’s Revenue Pipeline, Measure for Measure.

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Distributions

The above graph compares Plains All American’s one-year total returns with AMLP and its peers. Plains All American announced a quarterly cash distribution of $0.70 per limited partner unit for 4Q15. This was unchanged from its 3Q15 per unit distribution. Currently, it trades at a dividend yield of ~17%.

Analysts’ recommendations

The median target price for Plains All American in one year was $27.65 as of February 8, 2016. The target price was provided by analysts surveyed by Bloomberg. The low and high target price for the stock over the same period was $16 and $51, respectively. The median target price implies a 74% price return in a year from Plains All American’s current price of $15.88.

About 32% of the analysts surveyed rated Plains All American a “buy,” 60% rated it a “hold,” and 8% rated it a “sell.”

Outlook 

Plains All American provided guidance of adjusted earnings before interest, tax, depreciation, and amortization of $570 million for 1Q16 and $2,275 million for the full-year 2016. Based on a $2.8 per unit annual distribution, its distribution coverage is expected to be ~0.87x for 2016. However, certain factors could impact Plains All American’s performance in 2016.

Greg Armstrong, Plains All American’s chairman and CEO, said during the conference call that “Nonetheless, PAA’s near term operating results could well be impacted by the actions of others. During today’s call, we provided quarterly and annual guidance in a format similar to that provided by PAA over the last 15 years. However, more so than in any of the past years, PAA’s near-term performance will be influenced by uncontrollable and unknown factors such as variations in producers’ activity levels and competitive reactions from certain of our public and private midstream peers.”

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