Delek Logistics LP (DKL - Free Report) owns and operates a system of crude as well as refined product transportation pipelines, along with terminaling and storage facilities.
Let’s focus on the factors that make this Zacks Rank #1 (Strong Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Upward Revision in Estimates
The Zacks Consensus Estimate for 2020 earnings per unit has increased 33% in the past 60 days to $4.11.
The Zacks Consensus Estimate for 2021 earnings is pegged at $4.75 per unit, which improved 29.8% in the past 60 days.
Delek Logistics’ trailing four-quarter earnings surprise is 11.01%, on average.
Minimum Volume Commitments
Delek Logistics stands to benefit from the existing multi-year contracts with customers having firm commitments. At the end of second-quarter 2020, nearly 92% of its existing contracts had duration of more than three years, which provided ample earnings visibility amid this unprecedented economic crisis.
Joint Venture & Drop Down
Last year, Delek Logistics entered into a joint venture (JV) agreement with Plains Pipeline, L.P. (PAA - Free Report) for the Red River Pipeline. The JV is supporting its initiative to grow the midstream business, while increasing crude oil sourcing flexibility.
Delek Holdings (DK - Free Report) has granted the firm a right of first offer on certain logistics assets. It dropped the Big Spring Gathering System and trucking assets to Delek Logistics in first-half 2020. These will be accretive to Delek Logistics’ bottom line.
Over the past 12 months, the stock has gained 12.1% against the industry’s decline of 46.4%.
Another Stock to Consider
Another top-ranked stock in the same space is TC Pipelines LP (TCP - Free Report) , currently holding a Zacks Rank #2 (Buy). TC Pipelines delivered an average earnings surprise of 19.3% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up 4.2% in the past 60 days.
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