Back to top

Analyst Blog

Following NuStar Energy L.P.’s (NS - Analyst Report) grim third quarter results, we have recalibrated our investment thesis on the midstream energy partnership to Underperform from Neutral.

San Antonio, Texas-based NuStar is a master limited partnership (MLP), which engages in the transportation and storage of crude oil as well as refined products in the U.S., the Netherlands Antilles, Canada, Mexico and the U.K. The partnership has interests in asphalt refining and marketing in the U.S. and is the second largest independent liquids terminal operator in the nation.

NuStar’s current asset base includes 8,417 miles of pipelines, 90 terminal facilities, 4 crude oil storage tank facilities, a fuels refinery with a processing capability of 14,500 barrels per day, and 50% interest in 2 asphalt refineries with a combined throughput capacity of 104,000 barrels per day. The partnership's combined system has more than 94 million barrels of storage capacity.

NuStar recently reported weak third quarter profits, hamstrung by lower margins in its asphalt and fuels marketing business. The owner and operator of crude oil and refined products pipelines and storage facilities reported earnings per unit (EPU) – excluding special items – of 19 cents, well below the Zacks Consensus Estimate of 50 cents and the year-ago profit of 92 cents.

Though we welcome the partnership’s decision to sell a 50% stake in its volatile asphalt operations, the continued poor outlook for the sector will be a further drag on NuStar’s near to medium term EBITDA.

We also remain concerned about NuStar’s high debt levels, which leave the partnership vulnerable to an extended downturn. As of September 30, 2012, NuStar had long-term debt (including current portion) of more than $2 billion, representing a debt-to-capitalization ratio of around 43%.

Considering these factors, we see NuStar – which was spun off from the U.S. refiner Valero Energy Corp. (VLO - Analyst Report) in 2006 – as a risky bet from which ordinary investors should exit. Our new long-term Underperform recommendation is supported by a Zacks #5 Rank (short-term Strong Sell rating).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.00 +3.09%
SANCHEZ ENE… SN 34.18 +2.67%
PANTRY INC PTRY 21.02 +2.09%
INTEL CORP INTC 35.15 +1.88%
PIPER JAFFR… PJC 54.54 +1.70%