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Top Midstream Stocks: Analysts’ Views and Target Prices

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MLPs dull after a strong start

At the beginning of 2019, the top midstream stocks had a fairly good start. So far in 2019, the top midstream stocks have risen more than 10%. However, they have been trading sideways lately. In this series, we’ll discuss how analysts look at the top MLPs. We’ll see which MLP offers the highest gain potential.

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Handsome upside potential

The above chart shows the top MLPs’ estimated upside potential based on analysts’ estimates. Midstream energy infrastructure major Energy Transfer (ET) offers a potential upside of more than 40%, while Kinder Morgan (KMI) stock indicates a gain of almost 8% for the next 12 months—the lowest among its peers mentioned above.

The top MLPs largely reported better-than-expected earnings in the fourth quarter. Kinder Morgan’s EBITDA grew 27% YoY (year-over-year) in the fourth quarter, which was driven by strong growth in natural gas demand.

Energy Transfer’s EBITDA increased 29% in the fourth quarter compared to the same period in 2017. The company had growth across all of its segments due to increased production driven by expansion projects and production growth in 2018.

Enterprise Products Partners also beat the consensus earnings estimates for the fourth quarter and reported adjusted EBITDA growth of 21% YoY. We’ll have to see whether or not the strong growth continues in 2019.

Currently, MLPs offer a handsome total return potential considering their higher distribution yield and upside potential based on analysts’ estimates. AMLP offers a distribution yield of 8.0%, which is a spread of 5%–6% compared to broader markets and Treasury yields.

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