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Global Partners L.P.

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It's not too often one can find a stock with big earnings growth and a high yield. But in the case of Global Partners L.P (GLP - Free Report) , an estimated long-term earnings growth projection of 20% coalesces with a 9% distribution. Presently trading near its 52-week high, units of this Zacks #1 Rank (Strong Buy) petroleum products distributor have climbed nearly 20% during the past month. With accretive acquisitions, incremental growth projects and a PEG ratio of less than 1.0, Global Partners looks like a solid aggressive play with a potential for further upside.

GLP Focused on Delivering Solid Returns After Warm Winter

Global Partners reported first quarter 2012 earnings per unit of 11 cents on May 8, lagging the Zacks Consensus Estimate of 22 cents and last year's profit of 39 cents. The results were primarily pulled down by significantly warmer-than-average winter weather that ate into heating oil sales and margins.

With the seasonal weakness behind it, Global Partners’ organic initiatives and strategic acquisitions are expected to deliver solid returns and drive strong earnings growth for this year and next.

The March purchase of Alliance Energy LLC – operator of 542 gasoline stations in New England, New York, New Jersey and Pennsylvania – will help Global Partners to enter fuel retail operations, and is expected to be accretive to its profits in the first year of operation.

In another important development, Global Partners recently announced plans to more than double its rail terminal capacity in Albany, New York by late summer to receive more volumes of cheap Bakken crude.

Generous Distribution Yield

Global Partners has paid distributions since 2006 and currently dishes out an impressive 8.7% yield. On July 19, the partnership raised its second quarter 2012 cash distribution to 52.5 cents per unit ($2.10 per unit annualized), representing an increase of approximately 5% over the previous payout.

Earnings Set to Move Up Sharply

Based on the premier assets, attractive market opportunities and high barriers to entry for other distributor networks/channels, analysts are predicting strong earnings growth for Global Partners over the next couple of years. The 2012 Zacks Consensus Estimate is $1.25, representing 30% earnings per unit growth over 2011. Next year’s average forecast is $1.80, corresponding with 44% growth.

Valuation Picture

Units of Global Partners are going for about 19.3 times forward estimates, which seems a bit pricey but should not disappoint investors given the strong earnings projections. Moreover, the PEG ratio of 0.98 suggests that the stock is still undervalued. The other metric that aggressive growth investors should look at – price to book – comes in at 1.5x, a 17% discount to the peer group average of 1.8x.

Market Performance & Technicals

The chart below shows a secular positive price movement since late-June, barring some minor pullbacks. In the process, units of Global Partners have also outperformed the 50 and 200-day moving averages. Currently trading close to its 52-week high, the ever-increasing gap between the unit price and that of the moving average lines indicates more bullishness. With the record warm winter weather behind, investors can look forward to further uptrend on the back of the Alliance acquisition and soon-to-be-completed growth projects.

The Bottom Line

Global Partners is well positioned on the growth curve with a very strong year over year profit increase forecasted, as well as a splendid yield and expected earnings-accretive contribution from several projects.

Waltham, Massachusetts-based Global Partners L.P. is a publicly traded master limited partnership that distributes refined petroleum products to customers in the northeastern U.S. It possesses one of the largest networks of refined petroleum terminals in the region. Additionally, Global Partners supplies fuel to approximately 800 retail gas stations in nine northeastern states.

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