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On Dec 28, Zacks Investment Research upgraded publicly traded energy pipeline partnership Magellan Midstream Partners LP (MMP - Analyst Report) to a Zacks Rank #2 (Buy).   

Why the Upgrade?

Operating environment and future growth prospects seem bright for Magellan as earnings estimates for the Tulsa, Oklahoma-based partnership are on the rise. Over the last 60 days, the Zacks Consensus Estimate for fourth-quarter 2013 rose 9.3% to 82 cents per unit, as most of the estimates (8 out of 11 estimates) were revised higher. Moreover, the Zacks Consensus Estimate for full-year 2013 is $2.53 per units, up 1.6% as 10 out of 12 estimates were revised higher during the same time frame.

Additionally, Magellan owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee- and tariff-based revenues. This includes the longest U.S. refined petroleum products pipeline system, access to more than 40% of refining capacity in the continental U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage.

Magellan has also established a track record of consistent distribution growth – its current quarterly distribution of 55.75 cents per unit ($2.23 per unit annualized) is up by 325% from its initial public offering at the beginning of 2001.

Finally, we believe that the partnership’s acquisition of Rocky Mountain pipeline properties from Plains All American Pipeline LP (PAA - Analyst Report) will help Magellan to generate significant cash flow by serving new geographic regions. The 550-mile property has 4 terminals with a storage capacity of 1.7 million barrels. The system carries refined fuels to South Dakota, Colorado and Wyoming.  

Other Stocks That Warrant a Look

One can also look at better-ranked players in the energy sector like Athlon Energy Inc. (ATHL - Snapshot Report) and Harvest Natural Resources Inc. (HNR - Snapshot Report). Both the stocks sport a Zacks Rank #1 (Strong Buy). 

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