How Will Magellan Midstream (MMP) Stock Be Affected By 90% Sale of BridgeTex Oil Line Capacity?

NEW YORK (TheStreet) -- Magellan Midstream Partners, L.P.  (MMP) sold about 90% of the capacity on its 300,000 barrel-per-day BridgeTex oil pipeline, which starts up later this month, according to company CEO Mike Mears, Reuters reports.

BridgeTex, which is expected to become a key supply route to alleviate a glut of crude oil in the Permian Basin, will run from Colorado City, TX, to refineries on the Gulf Coast near Houston, Reuters noted.

Capacity not booked will be used for short-term "spot" shipments, Mears said at the Barclays (BCS) CEO Energy Power Conference in New York, NY.

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The company had two open seasons to promote shipper interest in using the line, the first generating about 75% of capacity and the second bringing it closer to 90%, Mears added.

Shares of Magellan Midstream Partners closed at $82.96 yesterday.

TheStreet Ratings team rates MAGELLAN MIDSTREAM PRTNRS LP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MAGELLAN MIDSTREAM PRTNRS LP (MMP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MAGELLAN MIDSTREAM PRTNRS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has increased to $207.28 million or 20.35% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.36%.
  • The gross profit margin for MAGELLAN MIDSTREAM PRTNRS LP is rather high; currently it is at 52.87%. Regardless of MMP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MMP's net profit margin of 29.46% significantly outperformed against the industry.
  • Compared to its closing price of one year ago, MMP's share price has jumped by 52.39%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: MMP Ratings Report
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