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How Top Midstream Stocks Could Perform in 2019

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Analysts are bullish

With simplified structures and greater financial discipline, MLPs look better-equipped to perform in the volatile commodity price environment. Analysts look largely bullish on the top MLP and midstream stocks that we discussed in the previous part of this series. Around 92% of analysts surveyed by Reuters covering Enterprise Products Partners (EPD) provided a “strong buy” or “buy” rating. More than 85% rated Williams Companies (WMB), Kinder Morgan (KMI), Energy Transfer (ET), and MPLX (MPLX) as a “strong buy” or “buy.”

The above graph shows analysts’ recommendations for the top midstream companies by market capitalization.

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Upside potential

Based on their median price targets, Energy Transfer has the highest potential upside among the selected stocks. With a median price target of $21, Energy Transfer has a potential upside of ~41% from its current price. On the other hand, ONEOK (OKE) has the lowest upside potential among the selected stocks. With a median price target of $70, ONEOK has an upside potential of ~15% in a year.

The remaining six stocks—Plains All American Pipeline (PAA), WMB, KMI, EPD, MPLX, and Magellan Midstream Partners (MMP)—have potential upsides between 20% and 25%.

Recent rating updates

On January 16, Barclays raised its rating for Williams Companies from “equal weight” to “overweight.” At the same time, it cut its price targets for ONEOK, MPLX, and Magellan Midstream Partners.

On January 14, UBS cut its price target for ONEOK from $75 to $68. On January 11, Raymond James started coverage on ONEOK with a “strong buy” rating.

On January 15, Credit Suisse cut its price target for MPLX from $45 to $44. On the same day, Credit Suisse cut its price target for Magellan Midstream Partners from $77 to $76.

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