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Why Investors Should Consider Retaining MPLX Stock for Now

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MPLX LP (MPLX - Free Report) has seen upward earnings estimate revisions for 2023 and 2024 in the past 30 days.

The partnership, currently carrying a Zacks Rank #3 (Hold), has gained 4.5% in the past six months compared with 0.3% growth of the composite stocks belonging to the industry.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

What’s Favoring the Stock?

Being a leading midstream energy player, MPLX is least exposed to commodity price fluctuations. This is because shippers contract midstream assets for the long term. Thus, their business model is relatively low-risk, indicating less exposure to oil and gas price, and volume risks.

The partnership’s assets involve a network of pipelines that carry crude oil and refined products. It also generates cashflows from fuel distribution operations. In the prolific supply basins in the United States, MPLX has natural gas and natural gas liquids’ processing and fractionation facilities. Apart from gauging low-carbon opportunities, MPLX is banking on several organic growth projects.

Strong and stable operations back the partnership to persistently grow its distributable cash flow (DCF). In 2022, the partnership generated $5 billion in DCF, higher than the year-ago level of $4.8 billion. Also, distributable cash flow attributable to MPLX increased 4.8% year over year to $1,268 million in the first quarter.

Backed by its stable and growing business, the partnership is committed to returning capital to unitholders. In the first quarter, it paid out more than $821 million of capital to unitholders through distributions and unit repurchases.

Thus, MPLX stock appears to be a solid bet based on strong fundamentals and compelling business prospects.

Risks

MPLX has a significantly higher exposure to debt capital than composite stocks belonging to the industry. Also, increasing expenses related to operations is hurting the bottom line.

Stocks to Consider

Some better-ranked players in the energy space are Seadrill Limited (SDRL - Free Report) , Evolution Petroleum Corporation (EPM - Free Report) and PHX Minerals Inc. (PHX - Free Report) . SDRL and EPM currently sport a Zacks Rank of 1, and PHX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Seadrill is a market-leading international driller with strong exposure in key strategic basins like the U.S. Gulf of Mexico, Brazil and Angola. SDRL reported first-quarter 2023 earnings of 83 cents per share, beating the Zacks Consensus Estimate of earnings of 55 cents per share.

Seadrill has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for SDRL’s 2023 and 2024 earnings is pegged at $2.93 per share and $4.01 per share, respectively.

Evolution Petroleum is an independent energy company. EPM reported first-quarter 2023 earnings of 42 cents per share, beating the Zacks Consensus Estimate of earnings of 17 cents per share.

Evolution Petroleum has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for EPM’s 2023 and 2024 earnings is pegged at $1.11 and $1.05 per share, respectively.

PHX Minerals is an oil and natural gas mineral company. PHX Minerals posted first-quarter 2023 earnings of 11 cents per share, beating the Zacks Consensus Estimate of earnings of 7 cents per share.

PHX Minerals has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 30 days. The consensus estimate for PHX’s 2023 and 2024 earnings per share is pegged at 30 cents and 55 cents, respectively.

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