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Buckeye Partners’ 4Q17 Earnings and Growth Outlook

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Part 4
Buckeye Partners’ 4Q17 Earnings and Growth Outlook PART 4 OF 4

Buckeye Partners: Wall Street Recommendations after 4Q17 Earnings

Buckeye Partners’ outlook

Amid the backwardation market conditions and significant inventory draws, Buckeye Partners’ (BPL) terminal capacity utilization is expected to remain a challenge in 2018. Moreover, the partnership’s major expansion plans—including the South Texas Gateway project—are expected to take some time. The partnership recently announced open season for the project. Phase 2 of the Michigan/Ohio expansion project isn’t expected to come online before the end of 2018 amid regulatory hurdles related to the reversal of the partnership’s Laurel pipeline. 

Buckeye Partners: Wall Street Recommendations after 4Q17 Earnings

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Overall, the partnership expects to spend between $275 million and $325 million on organic expansion in 2018, which at the midpoint represents a marginal increase of 2.4% compared to 2017.

But investors should not expect a distribution increase or meaningful stock price appreciation from the partnership in the next year, considering its low expansion and weak distribution coverage. At the same time, investors could continue to enjoy attractive distribution yields from Buckeye Partners for the whole of 2018 until there’s a distribution cut, which is very unlikely, considering management’s recent confirmation. We looked into the partnership’s yield and distribution plans in the previous part of this series.

What Wall Street analysts think

Buckeye Partners saw three downward price revisions following its 4Q17 earnings announcement. These target price cuts include:

  • Barclays, from $58 to $55
  • Mizuho, from $60 to $55
  • Stifel, from $63 to $56

56.0% of analysts rate Buckeye Partners a “hold” as of February 12, 38% rate it a “hold,” and the remaining 6.0% rate it a “sell.” BPL’s average target price of $56.5 implies ~10% upside potential from the current price levels.

BPL’s peers Magellan Midstream Partners (MMP) and NuStar Energy (NS) have “hold” ratings from 36.8% and 75.0% of analysts, respectively. 54.5% of analysts rate Kinder Morgan (KMI) a “buy.” For more analysis on master limited partnerships, see our Energy MLPs page.

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