What Can We Expect from Genesis Energy's 4Q15 Earnings?
Most analysts rate Genesis Energy a “buy”
In this article, we’ll look at what Wall Street analysts recommend for Genesis Energy (GEL). At a broader level, ~60.0% of analysts rate GEL a “buy,” and the remaining ~40.0% rate it a “hold.” The MLP (master limited partnership) has no sell recommendations.
The median broker target price of $44 for GEL implies a ~115.4% price return in the next 12 months from its closing price of $20.40 on February 11, 2016. GEL’s peers Shell Midstream Partners (SHLX) and Sunoco Logistics Partners (SXL) have “buy” ratings from 60.0% and 62.5% of analysts, respectively. 88.9% of analysts have rated NuStar Energy (NS) a “hold.” GEL constitutes 0.49% of the Global X MLP & Energy Infrastructure ETF (MLPX).
Long-term outlook
GEL’s overall long-term outlook looks positive. Investors should consider the following positives and negatives before they decide to include GEL in their portfolio.
Positives
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GEL has an impressive distribution coverage ratio of 1.4x despite strong distribution growth. The partnership expects to use the excess cash flows for repaying debt.
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GEL should benefit from the acquisition of Enterprise Product Partners’ (EPD) offshore crude oil pipeline assets.
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GEL’s assets are diversified across multiple businesses.
Negatives
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There has been a decline in throughput volumes across a few of GEL’s crude oil pipeline systems, driven by the fall in crude oil prices.
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GEL’s supply and logistics segment is not doing well and the weak operating performance is expected to continue in the coming quarters.
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GEL is more leveraged than its peers. The partnership’s adjusted debt-to-pro forma EBITDA ( earnings before interest, tax, depreciation, and amortization) stood at 5.0x at the end of the third quarter. The recent increase in GEL’s leverage is due to the rise in indebtedness driven by the acquisition of EPD’s offshore assets.
For more pre-earnings coverage on midstream companies, check out Master Limited Partnerships page.
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