JP Morgan analysts on Tuesday praised energy MLPs for delivering a ~3% year-to-date return, even amid a choppy market as a result of inflation and interest rate concerns, and They said fundamentals remain broadly constructive on oil prices supporting output growth. .
JP Morgan analysts, in midstreamers, raised concerns about lower commodity prices as they headed into fourth-quarter earnings, but to their surprise the opposite was proven. Companies issued a better-than-expected outlook as rising inflation-indexed margins more than offset weaker prices and higher costs.
The analysis singled out Energy Transfer (ET) and Enterprise Products Partners (EPD) as the top two choices for the brokerage.
JPM analysts also noted that downward trends appeared “generally enduring” in the earnings report.
Targa Resources (TRGP) became a midstream darling for JP Morgan due to its Permian well to export value chain. At Cheniere Energy (LNG), the brokerage said its long-term contracted cash flows are “undervalued.”
Magellan Midstream Partners (MMP) and MPLX LP (MPLX) were also included in the analysis for their “cash flow stability at attractive prices” even with their downstream exposures. MPLX was upgraded to an investment rating of “overweight” from “neutral.”
Crestwood Equity Partners (CEQP) was downgraded to “neutral” from “overweight,” citing the company’s weak execution and less financial flexibility.
