Shares of Magellan Midstream Partners (MMP) gained 2.9% after the company inked a deal to sell its independent terminals network to Buckeye Partners for $435 million.
Magellan Midstream Partners is a publicly-traded company that primarily transports, stores, and distributes refined petroleum products and crude oil. It has access to nearly 50% of the refining capacity in the U.S.
Located in the south-eastern U.S., the terminal network includes 26 refined petroleum products terminals with approximately 6 million barrels of storage capacity. (See MMP stock analysis on TipRanks)
MMP CEO Michael Mears said, “The sale of our independent terminals demonstrates Magellan’s continued focus on utilizing all available options, including optimization of our asset portfolio, to maximize unitholder value.”
Magellan plans to use the sale proceeds towards its pre-defined capital allocation priorities.
Following the announcement, Stifel Nicolaus analyst Selman Akyol reiterated a Buy rating on the stock and increased the price target from $50 to $54. This implies that shares are almost fully priced at current levels.
Akyol said, “We view the sale favorably given these assets are not located around MMP’s core Gulf Coast/Midwest product distribution system. Additionally, proceeds from this divestiture, along with the previous announced MVP JV interest sale, should provide the partnership with significant excess cash and optionality to potentially buyback units.”
He added, “While MMP has had a solid track record of divesting assets over the last several years, we believe the management is focused on creating value. We continue to favor the MMP story because of its conservative financial profile, flexibility of divestiture proceeds and the normalization of refined product demand.”
Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 9 Holds. The MMP average analyst price target of $50.13 implies 6.35% downside potential from current levels. Shares of MMP have jumped 25.6% over the past year.