Back to top

Analyst Blog

Zacks Investment Research downgraded Colorado-based MarkWest Energy Partners LP (MWE - Analyst Report) to Zacks Rank #5 (Strong Sell) on Mar 5.

Why the Downgrade?

MarkWest Energy witnessed sharp downward estimate revisions after reporting disappointing fourth-quarter 2012 results. In fact, this natural gas processor and distributor delivered negative earnings surprises in 3 of the last 4 quarters with an average miss of 9.72%.

On Feb 27, 2013, MarkWest Energy reported weak fourth quarter 2012 results, reflecting lower commodity prices.

The partnership’s profit per unit – excluding mark-to-market derivative activity and compensation expense – came in at 22 cents against the Zacks Consensus Estimate of 36 cents. MarkWest’s adjusted earnings per unit also deteriorated from the year-earlier adjusted figure of 47 cents per unit.

With regard to business units, the Southwest segment’s operating income decreased 34.6% from the year-ago level to $73.2 million. The Northeast segment’s operating profit of $31.6 million also fell 21.8% from last year’s income of $40.4 million, affected by lower fractionated volumes.

For 2013, estimates were revised downward over the last 7 days, lowering the Zacks Consensus Estimate by 2.76% to $1.76 per unit.

Additionally, due to the volatile nature of the natural gas processing business, we do not see any significant price upside for MarkWest units in the next few quarters. We expect the partnership to grow at a somewhat more conservative and sustainable pace.

Other Stocks to Consider

Not all energy stocks are performing as poorly as MarkWest Energy.  The stocks of Range Resources Corp. (RRC - Analyst Report), Enerplus Corporation (ERF - Snapshot Report) and NGL Energy Partners LP (NGL - Snapshot Report) are worth considering. All these firms – sporting a Zacks Rank #1(Strong Buy) – offer value and are worth accumulating at current levels.

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