Investors looking for some solid and stable income amid the market turbulence should consider Genesis Energy, L.P. (GEL - Snapshot Report). The partnership has raised its quarterly distribution 25 times in a row, and it currently yields a juicy 6.4%.
Earnings estimates have been rising too after the company delivered better than expected results for the third quarter of 2011. It is a Zacks #1 Rank (Strong Buy) stock.
Based on current consensus estimates, analysts project 68% earnings growth this year and 29% growth next year.
Genesis Energy, L.P. is a master limited partnership (MLP) focused on the midstream segment of the oil and gas industry in the Gulf Coast region of the U.S.
It is headquartered in Houston, Texas and has a market cap of $1.9 billion.
Third Quarter Results
Genesis recently reported better than expected results for the third quarter. Earnings per unit came in at 27 cents, beating the Zacks Consensus Estimate of 23 cents. It was a whopping 125% increase over the same quarter in 2010.
Gross profit (revenues minus costs of sales) jumped 53% year-over-year driven by significant volume increases across most segments.
Operating income surged 181% as the company leveraged its general and administrative expenses.
Genesis produced total available cash before reserves of $37.0 million in the quarter, up 32% year-over-year. This provided a healthy 1.2x coverage for its quarterly distribution
Genesis pays a distribution that yields a stellar 6.4%.
After cutting its distribution early last decade, the partnership has been consistently raising it over the last several years:
Genesis recently reported a 10% year-over-year increase in its distribution, marking its 25th consecutive quarterly increase, and the 20th time the increase was at least 10%.
Following better than expected Q3 results, analysts raised their estimates for both 2011 and 2012, sending the stock to a Zacks #1 Rank (Strong Buy).
Based on consensus estimates, analysts are predicting strong earnings growth for Genesis over the next couple of years.
The 2011 Zacks Consensus Estimate is $1.09, representing 68% earnings per unit growth. The 2012 consensus estimate is $1.41, corresponding with 29% growth.
Valuation looks reasonable for GEL. The stock trades at 19.5x 12-month forward earnings, a discount to its historical median of 21.1x.
The Bottom Line
Genesis Energy offers investors excellent growth potential and very solid income with a 6.4% distribution yield. With earnings estimates on the rise and valuation at reasonable levels, it looks like a good time to get onboard.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.