Neel Mitra, an analyst from Bank of America Securities, maintained the Sell rating on MPLX (MPLX – Research Report). The associated price target is $36.00.
Neel Mitra’s Sell rating on MPLX’s stock is influenced by a number of aspects. The company’s 3Q results were driven by higher Gathering and Processing (G&P) and crude volumes in addition to rate hikes. MPLX’s G&P business, however, appears to have struggled with growth, and the Logistics & Storage (L&S) segment’s impressive performance may not be sustainable. This is concerning as the L&S segment accounts for a significant portion of the company’s business. The 13% increase from the FERC inflation adjustor also played a part in the L&S segment’s success.
In the second half of his analysis, Mitra recognized MPLX’s efforts in expanding its Permian assets, but the regional scale remains insufficient. Although the company has been proactive in preparing for expected structural changes in natural gas demand and has been expanding its processing capacity in the Delaware, the EBITDA contribution from these projects is minimal compared to MPLX’s core operations. Furthermore, while MPLX has increased its base distribution by 10% to return capital to unitholders, Mitra argues that the company’s primary cash return tool should be unit repurchases rather than distribution increases. This combination of factors led Mitra to maintain his underperform rating and $36 price objective for MPLX.
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MPLX (MPLX) Company Description:
MPLX LP is a diversified, large-cap master limited partnership which owns and operates midstream energy infrastructure and logistics assets in the United States. The company provides a wide range of midstream energy services, including the storage, processing, and transportation of crude oil, refined petroleum products, natural gas, and other hydrocarbon-based products.
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