Back to top

Analyst Blog

On Nov 30, Zacks Investment Research upgraded Western Gas Partners LP (WES - Snapshot Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

This oil & gas pipeline operator has delivered a 32.50% earnings beat in the most recent quarter. The long-term sales growth of the partnership is pegged at 25.0%.

Western Gas Partners has begun to realize the benefits of organic investments made in early 2012. After matching the earnings expectation for the second quarter, the partnership handsomely surpassed the consensus for the third quarter. The Street reacted positively to the earnings beat with the Zacks Consensus Estimate for 2013 increasing 9.9% in the last 30 days to $1.67 per share. This reflects projected year-over-year growth of 3.01%.

The strong performance has allowed the partnership to increase its quarterly cash distribution to 58 cents per unit, a 16% increase from the prior-year distribution of 50 cents.

The partnership offered $250 million, 2.6% senior notes in the third quarter, which received investment grade rating from the top three rating agencies. The proceeds were used to repay its dues under the revolving credit facility.

The partnership has consistently invested in capital projects like Lancaster Trains I and II to boost its future prospects. The Lancaster Trains projects are expected to come online at the end of 2014, beginning 2015.

In Jun 2013, the partnership decided to acquire a 25% at-cost interest in a joint venture with Enterprise Products Partners L.P. (EPD - Analyst Report). The joint venture will own two fractionation trains in Mont Belvieu, Texas. This strategic investment will also boost the top-line of the partnership.

Other Stocks to Consider

Besides Western Gas Partners, other players in the sector, which look attractive at current levels, include Crosstex Energy Inc. and EQT Midstream Partners (EQM - Snapshot Report).  Both these stocks carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.