Oiltanking Partners, L.P. ( OILT - Snapshot Report ) hit a 52-week high of $38.55 on August 27, following strong second quarter results that included an 11% earnings surprise. With an impressive year-to-date return of 36.1%, distribution coverage of 1.42x and a triple-digit earnings growth expectation for 2012, this Zacks #1 Rank (Strong Buy) provider of oil and refined products storage services is poised for further upside.

Solid Second Quarter, Healthy DCF

On August 8, Oiltanking Partners posted second quarter earnings of 41 cents per limited partner unit, surpassing the Zacks Consensus Estimate of 37 cents by 10.8%. The outperformance was driven by higher storage and throughput volumes – which drove higher ancillary service fees – accompanied by lower operating expenses.

The partnership’s total revenue came in at $33.8 million, up 14.1% from the year-ago level and better than the Zacks Consensus Estimate of $33.0 million by 2.4%. All three segments posted higher results, aided by additional revenues from a new storage capacity that was placed into service in April, along with increased throughput during the quarter.

Distributable cash flow (DCF) – an indicator of cash paid for distribution to unitholders – escalated approximately 5.7% sequentially to $20.2 million, providing a healthy 1.42x distribution coverage.

Improving Growth Visibility

The partnership remains positive on its crude storage expansion and pipeline projects. Notably, with its storage capacity fully contracted, Oiltanking Partners’ $200 million crude oil storage and pipeline projects in the Gulf Coast should be solid growth drivers.

The partnership is poised to benefit from its list of projects. Additionally, Oiltanking Partners’ strategically located assets on the Houston Ship Channel and the Port of Beaumont will continue to bring organic growth opportunities.

Earnings Momentum on the Rise

Over the last 30 days, the Zacks Consensus Estimate for 2012 increased 4.7% to $1.55 per unit, aided by upward revisions from four of six total estimates. This implies a substantial year-over-year growth of 158.6%. Moreover, the Zacks Consensus Estimate for 2013 increased 7.9% to $1.64, with four of six estimates again heading north.

Valuation Appears Reasonable

Oiltanking Partners currently trades at a forward P/E of 24.5x, a 35.8% discount to the peer group average of 38.1x. The partnership’s strong growth prospect remains well supported by its long-term estimated EPU growth rate of 48.6% (versus peer group average of only 7.3%).

Importantly, Oiltanking Partners has a PEG ratio of 0.50, a 50% discount to the benchmark of 1 for a fairly priced stock.

The stock also looks attractive with regard to its trailing 12-month Return on Assets (ROA) of 15.5%, which is above the peer group average of 4.0%. Again, its Return on Investment (ROI) of 16.6% is significantly above the peer group average of 4.2%.

Chart Confirms the Upward Trend

Units of Oiltanking Partners have been trading above the simple moving average for 50 days or SMA (50) as well as for 200 days or SMA (200) since late June. The continuous uptrend in stock prices, as well as the ever-increasing gap between the unit price and that of the moving average lines, indicates a greater bullish trend. The year-to-date return for the stock is also solid at 36.1% compared to an S&P 500 tally of 12.1%.

Formed in March 2011, Oiltanking Partners L.P. is engaged in the terminaling, storage, and transportation of crude oil, refined petroleum products and liquefied petroleum gas. Notably, its terminal assets are located along the upper Gulf Coast of the U.S. on the Houston Ship Channel and in Beaumont, Texas. This MLP’s facilities are directly linked to refineries and storage and production facilities along the upper Gulf Coast area via pipelines to end markets along the Gulf Coast and to the Cushing storage hub in Oklahoma.