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Could Magellan Midstream Generate Positive Returns in 2018?

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Aug. 18 2020, Updated 10:31 a.m. ET

MMP’s fall in 2017

Magellan Midstream Partners (MMP) fell nearly 7% in 2017, and including distributions, the stock fell 2%. Midstream energy peers Enterprise Products Partners (EPD) and Kinder Morgan (KMI) generated total returns of 4% and -11%, whereas ONEOK (OKE) fell 2%.

The Alerian MLP ETF (AMLP) fell 8% in 2017, and the SPDR S&P 500 ETF (SPY) (SPX-INDEX) rose 22%. Energy sector stocks significantly underperformed the broader markets in 2017.

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Total returns

Over the last five years, Magellan Midstream Partners has generated total returns of 102%, including distributions. It has outperformed peers Enterprise Products Partners, Kinder Morgan, and ONEOK, which have generated total returns of 37%, -38%, and 82%.

However, Magellan Midstream has generated negative returns over the three years. Lower energy commodity prices kept energy sector stocks down in 2017.

While oil prices have gained some strength over the last couple of months, this trend has not translated into substantial gains for midstream stocks so far. MLPs may strengthen in 2018 once the impact of seasonal and structural factors and tax-loss selling subsides. Energy commodity price stability should benefit this beaten-down sector in 2018.

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Moving averages

Magellan Midstream crossed above its 200-day moving average on December 28, 2017, a bullish sign. MMP may see some strength in the near term. Headquartered in Tulsa, Oklahoma, Magellan Midstream Partners transports, stores, and distributes refined petroleum products and crude oil in the United States.

In this series

In this series, we’ll analyze MMP in depth, looking at its price targets, segmental performance, fee-based business, leverage, distributable cash flow, capital expenditure, and distribution growth.

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