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Should You Include Tesoro Logistics in Your Portfolio?

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Dec. 4 2020, Updated 10:51 a.m. ET

Analysts’ recommendations

Of the analysts surveyed by Bloomberg, 80% rated Tesoro Logistics (TLLP) as a “buy,” and 20% rated it as a “hold.” None of the surveyed analysts rated it as a “sell.”

The median target price for Tesoro Logistics in one year is $62. Over the same period, the low and high target prices for the stock are $56 and $66, respectively. Currently, Tesoro Logistics’ shares are trading near $43.9. If it attains the median target price within a year, it would mean a 41% price return for investors. Even the low target price of $56 implies a 28% return from TLLP’s current price.

The above graph shows Tesoro Logistics’ stock performance over the last 12 months. It also shows the high, median, and low targets for the stock over the next 12-month period. TLLP forms 2.5% of the Alerian MLP ETF (AMLP).

As for its peers, 67% of analysts rated Phillips 66 Partners (PSXP) as a “buy,” one-third of analysts rated Holly Energy Partners (HEP) as a “buy,” and half of analysts rated PBF Logistics (PBFX) as a “buy.”

Tesoro Logistics’ high earnings growth, consistent distribution growth, and strong coverage likely contribute to its high percentage of “buy” recommendations.

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Growth driven by capital projects

Greg Goff, chairman and CEO of TLLP’s general partner, said in the 4Q15 earnings release, “We also completed the integration of the Rockies natural gas business and the merger of QEPM, which for the full year 2015 contributed $285 million of adjusted EBITDA, exceeding our target of $275 million of adjusted EBITDA.”

Goff continued, “The business delivered approximately $30 million of synergies in the full year 2015, exceeding our $25 million synergy target. Additionally, in November we acquired the Los Angeles Storage and Pipeline Assets from Tesoro which further grew our portfolio of committed, fee-based logistics assets.”

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