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Can Crestwood Equity Partners Gain Upward Momentum from Here?

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CEQP’s moving average

Crestwood Equity Partners (CEQP) is trading above its short-term (50-day) and long-term (200-day) moving averages. It was trading 4.0% above its 50-day SMA (simple moving average) and 22.0% above its 200-day SMA on July 13. This could indicate a bullish view of the stock. 

In comparison, Western Gas Partners (WES) and EnLink Midstream Partners (ENLK) were trading 2.9% and 6.8%, respectively, below their 50-day moving averages.

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The recent decline in crude oil prices, a correction in the midstream energy sector, and low valuations could result in negative sentiment for the stock. On the other hand, strong drilling activity, recent rating upgrades, and a positive earnings surprise could drive positive momentum in CEQP stock.

Short interest in CEQP

Short interest in Crestwood Equity Partners reached 2.3 million shares on July 13. CEQP’s short interest as a percentage of float ratio was 3.5% on the same date. The current short interest in CEQP is higher than the 30-day average of 3.1%. An increase in short interest with an increase in its stock price indicates that the market expects CEQP’s stock to decline.

CEQP’s current valuation

Crestwood Equity Partners was trading at a distribution yield of 7.2% on July 13. Its current yield is lower than its one-year and two-year averages of 9.0% and 15.9%, respectively. It’s also lower than the Alerian MLP ETF (AMLP), which was trading at a yield of ~8.0% despite the partnership’s flat distribution.

Crestwood Equity Partners’ forward enterprise-value-to-EBITDA ratio was 10.6x on July 13, which is higher than its one-year and three-year averages of 10.2x. It’s also above the peer median multiple of 10.3x. Western Gas Partners (WES) and DCP Midstream Partners (DCP) are trading at 9.3x and 9.5x, respectively.

CEQP’s high valuation compared to its historical average and its peers may not be supported considering its weak earnings growth guidance for 2018, insufficient expansion opportunities, and weak operating performance for two of its three business segments. 

CEQP expects to end 2018 with adjusted EBITDA of $390.0 million–$420.0 million. At the midpoint, that represents 2.5% year-over-year growth compared to 2017.

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