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Here's Why Investors Should Consider Retaining MPLX Stock Now
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MPLX LP (MPLX - Free Report) has seen upward earnings estimate revisions for 2023 and 2024 in the past 60 days.
The partnership, currently carrying a Zacks Rank #3 (Hold), has gained 20.2% in the past six months compared with 15.8% growth of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
Factors Driving the Stock
Favorable Style Score
MPLX is well-poised for progress, as evidenced by its impressive VGM Score of B. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Outlook
The Zacks Consensus Estimate for MPLX’s 2024 earnings is pegged at $4.01 per share, suggesting growth of 5.5% from the year-ago reported figure. The same for revenues is pinned at $11.8 billion, implying a year-over-year rise of 4%.
The consensus mark for 2025 earnings is pegged at $4.32 per share, indicating a year-over-year improvement of 7.6%. The same for revenues is pinned at $12.3 billion, hinting at a 7.6% increase.
Attractive Distribution Yield & Coverage
MPLX offers an attractive distribution yield, supported by a solid coverage ratio. For the first quarter of 2024, the distribution per common unit was 85 cents, up from 77.5 cents in the first quarter of 2023. The distribution coverage ratio remained strong at 1.6X, indicating that MPLX generates 1.6 times the cash required to cover its distributions. This robust coverage ratio provides a safety cushion for unitholders, ensuring reliable and potentially growing distributions even during periods of market volatility.
Key Business Tailwinds
MPLX has consistently demonstrated a robust financial performance, evident in its growing adjusted EBITDA and distributable cash flow (“DCF”). For the first quarter of 2024, the adjusted EBITDA increased 7.6% to $1,635 million from $1,519 million in the same period in 2023. This growth underscores MPLX's ability to generate substantial earnings before interest, taxes, depreciation and amortization, a crucial metric for evaluating its operating performance.
The company's DCF, a key indicator of cash available to unitholders, rose to $1,370 million in the first quarter of 2024 from $1,268 million in the first quarter of 2023, highlighting its strong cash generation capabilities. The steady increase in these metrics supports the company's ability to maintain and potentially increase its distributions to unitholders, reinforcing its attractiveness as an investment.
MPLX's strategic acquisitions and expansion efforts significantly enhance its growth prospects. The acquisition of Utica midstream assets and the announced expansion of the Permian natural gas value chain are notable examples. These acquisitions not only increase MPLX's asset base but also provide opportunities for higher volumes and earnings. For instance, the acquisition contributed to a $20-million non-cash gain and higher volumes in the first quarter of 2024, showcasing the immediate positive impact on the company's financial performance.
MPLX maintains a strong balance sheet, which is crucial for sustaining its growth and distribution strategies. As of the first quarter of 2024, the company had a consolidated total debt of $20.706 billion and an improved leverage ratio of 3.2X, down from 3.5X in the previous year. This reduction in leverage demonstrates prudent financial management and enhances MPLX's financial flexibility to invest in growth opportunities and return capital to unitholders.
The company's commitment to returning capital to unitholders is evident from its substantial capital return initiatives. In the first quarter of 2024, the total capital returned to unitholders, including distributions and unit repurchases, was $951 million, an 8% year-over-year increase. This consistent capital return strategy underscores MPLX's focus on delivering value to its investors, making it attractive for those seeking reliable income streams.
Risks
There has been a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output. Lower production of oil and gas will likely hurt the demand for the partnership’s midstream assets.
SM EnergyCompany (SM - Free Report) is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term shareholder value.
The Zacks Consensus Estimate for SM’s 2024 and 2025 earnings per unit is pegged at $7.15 and $8.79, respectively. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2025 in the past 30 days.
Sunoco LP (SUN - Free Report) is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value and Growth Score of A.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Suncor Energy, Inc. (SU - Free Report) is Canada's premier integrated energy company. The company boasts an impressive supply chain network, owning significant oil sands and conventional production platforms, along with a strong downstream portfolio with a network of more than 1500 Petro-Canada retail and wholesale outlets.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.52 and $3.69, respectively. The company has witnessed upward earnings estimate revisions for 2025 in the past 60 days.
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Here's Why Investors Should Consider Retaining MPLX Stock Now
MPLX LP (MPLX - Free Report) has seen upward earnings estimate revisions for 2023 and 2024 in the past 60 days.
The partnership, currently carrying a Zacks Rank #3 (Hold), has gained 20.2% in the past six months compared with 15.8% growth of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
Factors Driving the Stock
Favorable Style Score
MPLX is well-poised for progress, as evidenced by its impressive VGM Score of B. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Outlook
The Zacks Consensus Estimate for MPLX’s 2024 earnings is pegged at $4.01 per share, suggesting growth of 5.5% from the year-ago reported figure. The same for revenues is pinned at $11.8 billion, implying a year-over-year rise of 4%.
The consensus mark for 2025 earnings is pegged at $4.32 per share, indicating a year-over-year improvement of 7.6%. The same for revenues is pinned at $12.3 billion, hinting at a 7.6% increase.
Attractive Distribution Yield & Coverage
MPLX offers an attractive distribution yield, supported by a solid coverage ratio. For the first quarter of 2024, the distribution per common unit was 85 cents, up from 77.5 cents in the first quarter of 2023. The distribution coverage ratio remained strong at 1.6X, indicating that MPLX generates 1.6 times the cash required to cover its distributions. This robust coverage ratio provides a safety cushion for unitholders, ensuring reliable and potentially growing distributions even during periods of market volatility.
Key Business Tailwinds
MPLX has consistently demonstrated a robust financial performance, evident in its growing adjusted EBITDA and distributable cash flow (“DCF”). For the first quarter of 2024, the adjusted EBITDA increased 7.6% to $1,635 million from $1,519 million in the same period in 2023. This growth underscores MPLX's ability to generate substantial earnings before interest, taxes, depreciation and amortization, a crucial metric for evaluating its operating performance.
The company's DCF, a key indicator of cash available to unitholders, rose to $1,370 million in the first quarter of 2024 from $1,268 million in the first quarter of 2023, highlighting its strong cash generation capabilities. The steady increase in these metrics supports the company's ability to maintain and potentially increase its distributions to unitholders, reinforcing its attractiveness as an investment.
MPLX's strategic acquisitions and expansion efforts significantly enhance its growth prospects. The acquisition of Utica midstream assets and the announced expansion of the Permian natural gas value chain are notable examples. These acquisitions not only increase MPLX's asset base but also provide opportunities for higher volumes and earnings. For instance, the acquisition contributed to a $20-million non-cash gain and higher volumes in the first quarter of 2024, showcasing the immediate positive impact on the company's financial performance.
MPLX maintains a strong balance sheet, which is crucial for sustaining its growth and distribution strategies. As of the first quarter of 2024, the company had a consolidated total debt of $20.706 billion and an improved leverage ratio of 3.2X, down from 3.5X in the previous year. This reduction in leverage demonstrates prudent financial management and enhances MPLX's financial flexibility to invest in growth opportunities and return capital to unitholders.
The company's commitment to returning capital to unitholders is evident from its substantial capital return initiatives. In the first quarter of 2024, the total capital returned to unitholders, including distributions and unit repurchases, was $951 million, an 8% year-over-year increase. This consistent capital return strategy underscores MPLX's focus on delivering value to its investors, making it attractive for those seeking reliable income streams.
Risks
There has been a slowdown in drilling activities, as upstream players mainly focus on stockholder returns rather than boosting output. Lower production of oil and gas will likely hurt the demand for the partnership’s midstream assets.
Stocks to Consider
Investors interested in the energy sector may look at some better-ranked companies mentioned below. The companies presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy Company (SM - Free Report) is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term shareholder value.
The Zacks Consensus Estimate for SM’s 2024 and 2025 earnings per unit is pegged at $7.15 and $8.79, respectively. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2025 in the past 30 days.
Sunoco LP (SUN - Free Report) is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes more than 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value and Growth Score of A.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.
Suncor Energy, Inc. (SU - Free Report) is Canada's premier integrated energy company. The company boasts an impressive supply chain network, owning significant oil sands and conventional production platforms, along with a strong downstream portfolio with a network of more than 1500 Petro-Canada retail and wholesale outlets.
The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $3.52 and $3.69, respectively. The company has witnessed upward earnings estimate revisions for 2025 in the past 60 days.