What BPL’s Valuation Suggests ahead of 1Q17 Results



Buckeye Partners’ market performance

Buckeye Partners (BPL) has risen 4.9% since the beginning of 2017. In comparison, BPL’s peers NuStar Energy (NS) and Kinder Morgan (KMI) have lost 2.2% and 0.4%, respectively, in 2017 while Sunoco Logistics Partners (SXL) has gained 0.04%. At the same time, the Alerian MLP ETF (AMLP), which comprises 25 midstream energy MLPs (master limited partnerships), has lost 0.4%. Moreover, BPL and its most peers are still trading lower than they were before the rout in energy prices.

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Buckeye Partners’ valuation

Buckeye Partners is currently trading at a price-to-distributable cash flow of 13.4x. The partnership is trading below the ten-quarter historical average of 14.9.

Buckeye Partners’ forward EV-to-adjusted EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple, which is based on next-12-month EBITDA estimates, is 11.8x. This multiple is below the peer median of 13.8.

Buckeye Partners is currently trading at a forward distribution yield of 7.4%. BPL’s forward yield is higher than the historical average. A company’s forward distribution yield is calculated by dividing its estimated one-year future distribution per unit by its market price per unit.

BPL’s undervaluation relative to its own historical valuation might indicate a buying opportunity, considering its robust distribution growth and expansion opportunities. At the same time, BPL’s low valuation might reflect its declining throughput volumes at the Domestic Pipelines & Terminals segment and high commodity price exposure at its Merchant Services segment.


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