On Thursday, BofA Securities initiated coverage on shares of MPLX LP (NYSE: NYSE:MPLX), assigning an Underperform rating with a price target of $43.00. The move reflects the firm's perspective on the company's future growth and earnings potential.
The coverage on MPLX LP, a midstream energy company, was assumed with the outlook that there will be lower growth in the coming years compared to previous performance. The analyst cited a return to approximately 2% in the Producer Price Index (PPI), a stark contrast to the 13% seen in the past. Additionally, the expectation is that the company's EBITDA will grow in the low single digits, rather than at 10%.
The analysis also pointed out that MPLX's participation in the Blackcomb project may place constraints on the company's ability to reduce capital expenditures in the near term. This limitation could subsequently affect the growth of dividends in the years 2025 and 2026.
Another factor influencing the Underperform rating is the potential impact of lower refining volumes. The analyst suggests that a reduction in refining activity may negatively affect Marathon Petroleum Corporation's (NYSE:MPC) volumes on crude and product pipelines, which would in turn influence MPLX's performance.
The price target of $43.00 set by BofA Securities indicates the firm's expectation of where the stock price may potentially head. This target is informed by the aforementioned factors that could shape MPLX's financial and operational trajectory in the upcoming years.
In other recent news, MPLX LP has been the subject of analysts' attention. Citi maintained a neutral rating on MPLX, anticipating its third-quarter 2024 EBITDA to align closely with the Street's average estimate of $1.677 billion.
The firm projects MPLX's annual distribution increase at 10%, supported by significant excess free cash flow and a 1.5 times coverage. Additionally, MPLX is expected to continue its share buyback program with an additional $75 million in repurchases predicted for the third quarter of 2024.
Meanwhile, Goldman Sachs upheld its Buy rating on MPLX, expressing optimism about the company's capital returns. The firm's analysis supports MPLX's mid-single-digit EBITDA growth target, which was first introduced in its fourth-quarter 2022 earnings report. Goldman Sachs believes MPLX can achieve the lower end of its EBITDA growth target, around 4%, through base growth and current capital expenditures of about $1 billion per year.
InvestingPro Insights
While BofA Securities has initiated coverage on MPLX LP with an Underperform rating, InvestingPro data and tips offer additional context to consider. MPLX's current market capitalization stands at $45.39 billion, with a P/E ratio of 10.78, suggesting a relatively modest valuation compared to earnings. This aligns with an InvestingPro Tip indicating that MPLX has been profitable over the last twelve months.
Despite concerns about future growth, MPLX boasts a strong dividend yield of 7.65% and has maintained dividend payments for 12 consecutive years, according to InvestingPro Tips. This consistent dividend history may appeal to income-focused investors, even as analysts project slower growth ahead.
It's worth noting that MPLX is trading near its 52-week high, with a price at 98.3% of its peak. This strength is reflected in the stock's impressive total returns: 33.61% over the past year and 29% year-to-date. These performance metrics suggest that the market has been optimistic about MPLX, potentially contrasting with BofA's cautious outlook.
Investors seeking a more comprehensive analysis can access 10 additional InvestingPro Tips for MPLX, providing a broader perspective on the company's financial health and market position.
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