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NuStar's Diversified Asset Base Impresses, High Debt a Drag
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On Mar 2, we issued an updated research report on Nustar Energy L.P. (NS - Free Report) .
NuStar has successfully weathered the prolonged crude price weakness through its large and diverse asset portfolio that ensured steady cash flows. However, we believe that MLP valuations will be largely disconnected from business fundamentals as long as the volatility in crude prices remains. Hence, the partnership currently carries a Zacks Rank #3 (Hold).
We are also optimistic about NuStar Energy’s strong pipeline of organic growth projects and acquisitions as these provide the partnership with an above peer-group average distribution coverage ratio.
Additionally, the majority of NuStar’s business is derived from an attractive set of fee-based storage and transportation assets that support the U.S. and international energy infrastructure. The partnership’s possibility of generating higher throughputs from the refined product pipeline is also encouraging.
However, the demand for transportation and storage services are directly linked to the price of the underlying commodities. With oil prices still significantly below the $110 per barrel level reached in 2014 and upstream firms consequently reducing their expenditure on exploration activities, the demand for such services may be impacted.
While the midstream MLP has outperformed the Zacks categorized Oil/Gas Production Pipeline MLP industry in the past three to six months, the ongoing weakness in NuStar's fuels marketing business points to its struggles in improving the unit's depressed gross margins. High operating costs and lower volumes in the Pipeline segment add to the woes. We are also concerned about the partnership’s high leverage.
In the last four quarters, Sunrun posted an average positive earnings surprise of 134.7%.
In the second last quarter, Delek Logistics Partners posted a positive earnings surprise of 13.8%.
In the last four quarters, Ultra Petroleum posted a positive earnings surprise of 93.7%.
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NuStar's Diversified Asset Base Impresses, High Debt a Drag
On Mar 2, we issued an updated research report on Nustar Energy L.P. (NS - Free Report) .
NuStar has successfully weathered the prolonged crude price weakness through its large and diverse asset portfolio that ensured steady cash flows. However, we believe that MLP valuations will be largely disconnected from business fundamentals as long as the volatility in crude prices remains. Hence, the partnership currently carries a Zacks Rank #3 (Hold).
We are also optimistic about NuStar Energy’s strong pipeline of organic growth projects and acquisitions as these provide the partnership with an above peer-group average distribution coverage ratio.
Nustar Energy L.P. Price
Nustar Energy L.P. Price | Nustar Energy L.P. Quote
Additionally, the majority of NuStar’s business is derived from an attractive set of fee-based storage and transportation assets that support the U.S. and international energy infrastructure. The partnership’s possibility of generating higher throughputs from the refined product pipeline is also encouraging.
However, the demand for transportation and storage services are directly linked to the price of the underlying commodities. With oil prices still significantly below the $110 per barrel level reached in 2014 and upstream firms consequently reducing their expenditure on exploration activities, the demand for such services may be impacted.
While the midstream MLP has outperformed the Zacks categorized Oil/Gas Production Pipeline MLP industry in the past three to six months, the ongoing weakness in NuStar's fuels marketing business points to its struggles in improving the unit's depressed gross margins. High operating costs and lower volumes in the Pipeline segment add to the woes. We are also concerned about the partnership’s high leverage.
Zacks Rank & Other Stocks to Consider
Some better-ranked players from the broader energy sector include Sunrun Inc. (RUN - Free Report) , Delek Logistics Partners, L.P. (DKL - Free Report) and Ultra Petroleum Corp. . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last four quarters, Sunrun posted an average positive earnings surprise of 134.7%.
In the second last quarter, Delek Logistics Partners posted a positive earnings surprise of 13.8%.
In the last four quarters, Ultra Petroleum posted a positive earnings surprise of 93.7%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>