Magellan Midstream Partners, L.P. (MMP) — This master limited partnership (MLP) transports, stores and distributes refined petroleum products through its 9,500-mile pipeline system. This is the longest refined petroleum products pipeline system in the United States with access to almost 50% of the nation’s refining capacity.
Last week, MMP and TransCanada Corporation (USA) (TRP) announced definitive plans to connect TransCanada’s Houston tank terminal to Magellan’s East Houston terminal. The new pipeline will be owned 50/50 by the two companies and is expected to be operational by late 2016. This connection will give key shippers access to Magellan’s Houston and Texas City crude oil distribution system.
S&P Capital IQ Equity Research rates MMP stock a “Buy” with a 12-month target of $78. In late November, its analysts raised their 2015 earnings estimate by 20 cents to $3.53 per unit and their 2016 estimate by 16 cents to $3.68.
MMP stock has broken its bearish resistance line despite the decline in energy prices. Note the three buy signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR), and the above-average buy side volume.
In my opinion, shares of this well-managed company will survive any further declines in oil prices. But since crude is still under pressure, I anticipate MMP stock could be bought on a pullback to $60. A stop-loss order should be entered below the support line at $56. My four-month target is $75, which would result in a gain of 25%, plus cash distributions. Capital IQ expects Magellan to pay out $3.35 in distributions this year.
