A master limited partnership (MLP) is a for-profit business venture that operates as a publicly listed limited partnership. This corporate structure is like a limited partnership, but these shares are traded on stock markets. Simply put, MLPs enjoy tax benefits like limited partnerships and offer liquidity like publicly traded securities.
MLPs are considered low-risk investments because they provide steady income in the form of constant cash distribution. Because the Democratic Party has outlined proposed tax hikes on corporations to invest in the nation’s social safety net and climate initiatives, and Treasury yields remain volatile ahead of an upcoming Fed meeting, MLPs could be ideal bets now.
Strong fundamentals and solid growth prospects make Alliance Resource Partners L.P. (ARLP), Westlake Chemical Partners LP (WLKP), and Star Group L.P. (SGU) solid bets now. These MLPs are currently trading below $30 and have a ‘Strong Buy’ rating in our proprietary POWR Ratings system.
Alliance Resource Partners L.P. (ARLP)
ARLP is a diversified natural resource company that produces and sells coal primarily to utilities and industrial users in the United States. Illinois Basin; Appalachia; and Minerals are the three operational segments of the Tulsa, Okla.-based company. In addition , the company provides various industrial and mining technology products and services, including miner and equipment tracking systems and proximity detection systems.
During the second quarter, ended June 30, 2021, ARLP’s revenue increased 42% year-over-year to $362.44 million. Its operating income came in at $55.01 million, compared to a $35.10 million operating loss in the prior-year quarter. The company reported $44.04 million in net income, compared to a net loss of $46.66 million in the same period last year. Its EPS amounted to $0.34, versus a $0.37 per share in the second quarter of 2020.
A $1.26 consensus EPS estimate for the current year represents a 223.5% improvement year-over-year. Likewise, $1.52 billion the consensus revenue estimate for 2021 represents a 14.6% increase from the same period last year. ARLP has gained 199.4% over the past year and 115.2% so far this year to close yesterday’s trading session at $9.64.
ARLP’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ARLP is also rated an A grade for Momentum, Sentiment, and Quality. Within the A-rated MLPs – Other industry, it is ranked #1 of 11 stocks.
To see additional POWR Ratings for Value, Stability, and Growth for ARLP, click here.
Westlake Chemical Partners LP (WLKP)
WLKP in Houston, Tex., acquires, develops, and manages ethylene manufacturing plants and related assets in the United States. The company’s ethylene production facilities primarily convert ethane into ethylene. In addition, it sells ethylene co-products directly to other parties on a spot or contract basis, including propylene, crude butadiene, pyrolysis gasoline, and hydrogen.
WLKP’s revenue increased 35.1% year-over-year to $322.23 million in the second quarter, ended June 31, 2021. Its operating profit grew 46.3% from its year-ago value to $122.76 million. The company’s net income surged 68.9% from the prior-year quarter to $25.10 million, while its EPS increased 65.1% year-over-year to $0.71 over this period.
The company’s EPS is expected to grow 9.6% year-over-year to $2.06 in its fiscal year 2021. In addition, its revenue is expected to increase by 16.6% in the current year. The stock has gained 21.8% in price over the past year and 15.2% over the past nine months to close yesterday’s trading session at $25.36.
WLKP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. WLKP also has an A grade for Quality, and a B for Value and Momentum. The stock is ranked #2 of 11 stocks in the MLPs – Other industry.
Beyond the POWR Ratings grades I have just highlighted, one can see the WLKP ratings for Stability, Growth, and Sentiment.
Star Group L.P. (SGU)
SGU offers home heating and air conditioning products and services to residential and commercial home heating oil and propane customers. It also provides plumbing services, builds, maintains, and repairs heating and air conditioning equipment, and sells diesel, gasoline, and home heating oil on a delivery-only basis. SGU is headquartered in Stamford, Conn.
For the third quarter, ended June 30, 2021, SGU’s revenue increased 21.9% year-over-year to $283.1 million. Its net cash provided from operating activities came in at $53.99 million over this period. The company reported an adjusted EBITDA of $155.18 million for the nine months ended June 30, 2021.
Also, the stock has advanced 2.4% in price over the past year and 5.7% year-to-date to close yesterday’s trading session at $9.95.
SGU’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to Strong Buy in our proprietary rating system. SGU is also rated an A grade for Quality, and a B for Value and Sentiment. Within the MLPs – Oil & Gas industry, it is ranked #1 of 38 stocks.
Click here to see additional POWR Ratings for Growth, Momentum, and Stability for SGU.
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ARLP shares fell $0.41 (-4.25%) in premarket trading Monday. Year-to-date, ARLP has gained 112.33%, versus a 16.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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