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Units of pipeline operator Magellan Midstream Partners LP (MMP - Analyst Report) hit a 52-week high of $69.31 on Feb 10. Notably, the partnership witnessed around 26.03% hike in its unit price over the past six months.  

Why the Bullishness?

On Feb 5, 2014, Magellan Midstream declared strong fourth-quarter 2013 earnings. The Tulsa, Oklahoma-based oil distributor reported earnings per unit (EPU) of 88 cents (excluding mark-to-market commodity-related pricing adjustments), surpassing the Zacks Consensus Estimate of 82 cents and the prior-year quarter’s adjusted profit of 69 cents. Improved transportation volumes of refined products primarily aided the results.

Moreover, on Jan 28, 2014, Magellan Midstream raised its fourth-quarter 2013 cash distribution by 5% sequentially and 17% year over year to 58.5 cents per unit ($2.34 per unit annualized).  

Lastly, Magellan Midstream 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 over 40% of refining capacity in the continental U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage.

However, the actual amount of cash distributed to Magellan Midstream unitholders may fluctuate and are directly exposed to the partnership’s future operating performance, which is susceptible to movements in margins and throughput volumes. Realized margins and/or volumes could differ significantly from our estimates, thereby affecting Magellan Midstream’s cash distributions.

As a result, Magellan Midstream carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Stocks to Consider

One can consider better-ranked players in the oil and gas pipeline master limited partnership sector like Crestwood Equity Partners LP (CEQP - Snapshot Report), Energy Transfer Equity LP (ETE - Snapshot Report) and NuStar Energy LP (NS - Analyst Report). Crestwood Equity sports a Zacks Rank #1 (Strong Buy), while Energy Transfer Equity and NuStar Energy hold a Zacks Rank #2 (Buy).

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