Magellan Midstream Partners
Magellan Midstream Partners (MMP) offers a potential upside of more than 21% based on analysts’ median target price of $73.2. Magellan Midstream Partners is trading at $60.3. Among the 21 analysts tracking Magellan Midstream Partners, six recommended a “strong buy,” five recommended a “buy,” nine recommended a “hold,” and one recommended a “sell” as of January 8. UBS cut Magellan Midstream Partners’ target price from $76.0 to $74.0 last week.
The above chart shows the normalized price performance of Magellan Midstream Partners stock along with the Alerian MLP ETF (AMLP).
Valuation and distribution yield
Magellan Midstream Partners is trading at an EV-to-EBITDA multiple of 12x based on analysts’ earnings estimates for 2019. The company looks relatively expensive compared to its peers. Magellan Midstream Partners’ historical valuation multiple is beyond 19x. Currently, Magellan Midstream Partners offers a distribution yield of 6.6%. The company raised its distribution ~13% in the last five years.
Western Gas Partners (WES) has a median target price of $54.9—compared to its current market price of $46.1. The target price indicates a potential upside of more than 19% for the next 12 months.
Western Gas Partners stock looks relatively cheap considering its forward EV-to-EBITDA multiple at 7.6x. Analysts expect a strong year-over-year earnings growth of more than 25% in 2019. Western Gas Partners offers a distribution yield of 8.6%, which is in line with the industry average. Western Gas Partners’ distribution grew 11.4% in the last five years.