Understanding MPLX’s 5th Position in the Top 7 MLPs

MPLX’s analyst recommendations

MPLX LP (MPLX) comes in fifth place in the top seven MLPs (master limited partnerships) by analyst ratings, likely due to its drastic rating improvements in recent months. MPLX’s “buy” rating percentage has risen from 68% at the end of 2016 to 94% as of September 28, 2017.

MPLX has seen four rating updates over that period, including three upgrades to “buy” and one new coverage initiation with a “buy” rating. The remaining 6% of the analysts surveyed by Reuters rate MPLX as a “hold.” The partnership has no “sell” ratings.

Understanding MPLX’s 5th Position in the Top 7 MLPs

Peers Targa Resources (TRGP) and Energy Transfer Partners (ETP) have “buy” ratings from 73.7% and 80.0% of analysts, respectively. MPLX is now trading below the low range ($38) of the analyst target prices. MPLX’s average target price of $42.4 implies a 22% upside potential from its current price levels.

Valuation analysis

MPLX was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 7.4x as of September 22—below its historical average of 14.8x and below the peer median multiple of 11.6x.

MPLX’s current distribution yield of 6.4% is above the historical average of 4.1%. The partnership has significant expansion plans in the liquid-rich Marcellus Shale, in addition to low leverage, strong distribution, impressive distribution coverage, and strong support from Marathon Petroleum (MPC).

MPLX recently completed the second dropdown from MPC valued at $1.1 billion. It expects to complete the remaining dropdown in 4Q17 and 1Q18. For details, check out Market Realist’s “What’s Driving the Rise in MPLX’s Capital Spending?

In the next part of this series, we’ll look into the analysts ratings for Hi-Crush Partners LP (HCLP).