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Will Andeavor Logistics’ Acquisition Support MPLX Stock?

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MPLX’s price performance

MPLX (MPLX) has underperformed its midstream peers so far in 2019. The stock is up only ~1% so far in 2019. In comparison, Enterprise Products Partners (EPD), Kinder Morgan (KMI), and ONEOK (OKE) are up 16%, 28%, and 24%, respectively. The Alerian MLP ETF (AMLP), which is composed of top energy MLPs, is up ~12%.

Marathon Petroleum (MPC) recently announced a plan to combine its two midstream MLPs, MPLX and Andeavor Logistics (ANDX).

The acquisition of Andeavor Logistics will strengthen MPLX’s position in the Permian Basin. It’s also expected to result in operational efficiencies and improved growth opportunities. If this happens, the improvements should be reflected in MPLX’s stock price.

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Recommendations for MPLX

Of the 12 Reuters-surveyed analysts covering MPLX, four have rated it as a “strong buy,” seven have rated it as a “buy,” and one has rated it as a “hold.” The average price target for MPLX is $39, which implies a potential upside of 24% from its current price. The graph above shows analysts’ recommendations and average price targets for MPLX over the last 12 months. As the graph shows, the average price target for MPLX has fallen from $42.4 in November to the current $39.

MPLX is currently trading at a yield of 8.5%, higher than most of its top midstream peers.

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