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Analyst Ratings: It’s Raining Upgrades for DCP Midstream

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Updated

Analyst ratings for DCP Midstream

It’s raining upgrades for DCP Midstream (DCP). DCP has been upgraded three times in the past ten days:

  • UBS: upgraded from “neutral” to “buy”
  • Drexel Hamilton: upgraded from “hold” to “buy”
  • Credit Suisse: upgraded from “underperform” to “neutral,” which is equivalent to “hold”

Of the analysts covering DCP Midstream, 67% rate it as a “hold,” 22% rate it as a “buy,” and the remaining 11% rate it as a “sell.”

The partnership is currently trading at its average target price of $39.90. DCP’s peers Western Gas Partners (WES) and Energy Transfer Partners (ETP) have “buy” ratings from 52.9% and 68.4% of analysts, respectively. Plus, 56.3% of analysts surveyed by Reuters rated EnLink Midstream Partners (ENLK) as a “hold.”

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Outlook for DCP Midstream

Investors can consider the following positives and negatives before they consider including DCP as a long-term investment.

Positives

  • DCP Midstream has a premier position in the prolific Permian Basin, DJ Basin, and STACK play.
  • DCP has strong support from its 50-50 joint venture sponsors—Phillips 66 (PSX) and Spectra Energy (SE). SE is expected to merge into Enbridge (ENB) on February 27, 2017, after having received all the necessary approvals.
  • DCP Midstream has a strong fee-based NGLs (natural gas liquids) logistics business.
  • DCP has a simplified corporate structure.
  • DCP Midstream has increased its 2017 EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] guidance.

Negatives

  • DCP Midstream has low distribution coverage despite flat distributions for the past several quarters.
  • DCP has exposure to natural gas and NGLs prices through natural gas midstream activities.
  • DCP Midstream has declining Eagle Ford and East Texas throughput volumes due to production-related shut-ins. However, this could improve considering the recent pickup in drilling activity in the Eagle Ford region.
  • DCP has increased leverage after the simplification transaction.

For more coverage on midstream companies, please check out our Master Limited Partnerships page.

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