Recent market performance

Genesis Energy (GEL) is a midstream MLP primarily involved in the offshore and onshore transportation of crude oil and natural gas. The partnership is engaged in supply and logistics, refinery services, and marine transportation. GEL has lost 39.7% since the beginning of this year. 

During the same timeframe, the Alerian MLP ETF (AMLP), which comprises 25 energy MLPs, has lost 19.1%. GEL is underperforming AMLP by 2,000 basis points. GEL is a constituent of AMLP.

Genesis Energy Ranks Ninth in Upside Potential among MLPs

Valuation analysis

Genesis Energy (GEL) was trading at a distribution yield of 9.2% on December 6, 2017. This is higher than the one-year and five-year averages of 9.1% and 6.3%, respectively. 

Moreover, the partnership’s forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 10.1x is below the five-year average of 14.6x.

Analysts’ recommendations

Genesis Energy ranked ninth in terms of upside potential among MLPs. It is currently trading below the low range ($26) of the analysts’ target price. The partnership’s average target price of $29.50 implies an ~32% upside potential from the current price levels. 

Barclays last upgraded Genesis Energy to “equal-weight,” which is equivalent to “hold,” from “underweight,” which is equivalent to “sell.” Overall, GEL has seen six rating updates in 2017 so far—three downgrades and three upgrades. Now, 50.0% of analysts rate GEL as “buy” while the remaining 50% rate it as “hold.”

In the final article of this series, we’ll look into the upside potential for EQT Midstream Partners (EQM).

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