Does Buckeye Partners Look Attractive near Its 52-Week Low?



Buckeye Partners’ market performance

Buckeye Partners (BPL), which is mainly involved in liquids transportation and terminaling, is trading close to its 52-week low of $59.70. The partnership lost 6.6% from June 1 to June 20, 2017. It has lost 10.0% year-to-date. 

BPL’s decline in June could be attributed to investors’ concerns over a decline in crude oil production, driven by the recent slump in crude oil prices. Oil rigs in the Eagle Ford region fell by three over the past two weeks after reaching a high of 78 in the week ended June 2, 2017. BPL has exposure to the Eagle Ford region.

With respect to its overall product mix, Buckeye Partners has low crude oil exposure. Plus, 68% of BPL’s 2017 adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] is expected to comprise refined products.

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Buckeye Partners’ commodity price exposure

Buckeye Partners has exposure to refined product prices through its Merchant Services business, where it mainly distributes refined products. The huge gasoline inventory buildup is driving gasoline prices lower.

Buckeye Partners’ valuation

Buckeye Partners is currently trading at a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 11.8x, which is below the five-year average of 13.7x. This figure is lower than the peer median of 12.6x. 

BPL looks attractive at these price levels considering its low direct crude oil exposure, strong distribution growth profile, demand pull throughput volumes, and low leverage.

Buckeye Partners’ analyst recommendations

Of the analysts surveyed by Reuters, 52.9% rated Buckeye Partners (BPL) as a “hold,” and the remaining 47.1% rated it as a “buy” on June 21, 2017. The partnership has no “sell” recommendations. 

BPL’s average target price of $75.80 implies a 25.9% return from its current price level of $60.20. BPL was last upgraded by Stifel from a “hold” to a “buy” in May 2017.


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