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Could These Top MLP Gainers Have Further Upside Potential?

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Arc Logistics Partners

Arc Logistics Partners (ARCX) ranked last in the list of top ten MLP gainers in 2017. ARCX has risen nearly 3% year-to-date, whereas the Alerian MLP Index has fallen ~15%. It is also the third MLP in the list that is about to be acquired—the other two are Alon USA Partners (ALDW) and Southcross Energy Partners (SXE). In August 2017, Arc Logistics Partners entered into an agreement to be acquired by Zenith, a company backed by Warburg Pincus.

A special meeting for ARCX’s unitholders to vote on the transaction is scheduled for December 18, 2017. The company expects the transaction to close in December 2017, subject to approvals.

Under the terms of the merger agreement, ARCX unitholders will receive $16.50 in cash for each ARCX unit, which represents a premium of ~15% to ARCX’s unit price as of August 28, 2017. As the above graph shows, following the news, the stock rose to levels close to the acquisition price.

Market capitalization

We’ll conclude the series with analyst recommendations for Calumet Specialty Products Partners (CLMT), Noble Midstream Partners (NBLX), and Viper Energy Partners (VNOM)—the top three MLP gainers, excluding those about to be acquired. Notably, all MLPs discussed in this series are small-cap stocks, with market capitalization ranging from just $150 million for Southcross Energy to $6.1 billion for Cheniere Energy Partners LP Holdings (CQH). Small-cap stocks tend to be riskier and more volatile than large- or mid-cap stocks.

Analyst recommendations

Of the analysts surveyed by Reuters, 20% rated Calumet Specialty a “buy, ” and 60% rated the stock a “hold.” CLMT has an upside potential of 12% in a year based on its consensus target price of $9. CLMT currently trades near $8.05.

In comparison, 90% of analysts rated Noble Midstream Partners a “buy, ” and 10% rated the stock a “hold.” NBLX has an upside potential of 16% in a year based on its consensus target price of $60. NBLX currently trades near $51.75.

Nearly 92% analysts rated Viper Energy Partners a “buy, ” and 8% rated the stock a “hold.” VNOM has an upside potential of 19% in a year based on its consensus target price of $22.50. VNOM currently trades near $18.96.

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