Why DCP Midstream’s Stock Has Outperformed the Sector in 2016



DCP Midstream’s market performance

DCP Midstream Partners (DPM), which mainly provides natural gas gathering and processing and NGLs (natural gas liquids) transportation and storage services, has gained 40.6% YTD (year-to-date) despite touching its multiyear low in the beginning of 2016. At the same time, the Alerian MLP ETF (AMLP), which comprises of 26 midstream energy MLPs, has gained 5.5%. DPM outperformed the ETF by 35.1 percentage points. This could be attributed to DPM’s lower leverage and strong support from its sponsors, Spectra Energy (SE) and Phillips 66 (PSX).

DPM’s peers Energy Transfer Partners (ETP), Enable Midstream Partners (ENBL), and EnLink Midstream Partners (ENLK) have returned 23.1%, 40.5%, and 2.7%, respectively, in 2016.

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A look at DPM’s moving averages

Currently, DPM is trading 1.1% above its 50-day moving average and 20.5% above its 200-day moving average. Plus, the 50-day moving average surpassed the 200-day moving average in June 2016, indicating a bullish trend in DPM’s stock.

DCP Midstream’s 2Q16 earnings

DCP Midstream’s 2Q16 EBITDA (earnings before interest, taxes, depreciation, and amortization) fell to $138 million from $151 million in 2Q15, a YoY (year-over-year) decline of 8.6%. The partnership’s recent performance was negatively impacted by Eagle Ford and East Texas throughput volume declines, expiration of certain direct commodity hedges, and lower commodity prices. This was slightly offset by a strong performance from the partnership’s DJ Basin system and higher NGLs throughput volumes.

Later in the series, we’ll analyze DPM’s balance position and cash flow measures. Following an analysis of DPM’s operating results, we’ll look into DPM’s valuations, commodity price exposure, key performance indicators, and analyst projections.


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