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Fri 14 Mar 2014, 19:18 GMT

NuStar shares upgraded from 'neutral' to 'buy'


Goldman Sachs says fee-based growth driven by its Eagle Ford project backlog will put NuStar 'back on track'.

Shares in terminal operator, asphalt refiner and bunker supplier NuStar Energy L.P. (NYSE: NS) have been upgraded from 'neutral' to 'buy' with a price target of $62.00 per share (from $49.00) by American multinational investment banking firm Goldman Sachs.

Goldman Sachs analyst Steve Sherowski said: "NS units have underperformed the AMZ by 1.4% over the past twelve months and its yield is currently trading 240 bps [basis points] above MLPs [master limited partnerships] under coverage. However, following 10 consecutive quarters of no distribution growth, including 9 in which distributions exceeded cash flow, we believe fee-based growth driven by its Eagle Ford project backlog will put it back on track for positive distribution coverage in 2H14 and for distribution increases by mid-2015."

Sherowski added: "We believe NS units will be rewarded with a higher valuation as project- driven cash flow growth visibility improves throughout 2014."

NuStar GP Holdings (NYSE:NSH) last announced its earnings results on February 5. The company reported $0.27 earnings per share (EPS) for the quarter, missing the consensus estimate of $0.34 by $0.07. On average, analysts predict that NuStar GP Holdings will post $1.50 earnings per share for the current fiscal year.

NuStar Energy L.P. reported a fourth quarter net loss applicable to limited partners of $368.3 million, or $4.73 per unit, compared to a net loss applicable to limited partners of $21.2 million, or $0.27 per unit, reported in the fourth quarter of 2012.

For the year ended December 31, 2013, the company reported a net loss applicable to limited partners of $311.5 million, or $4.00 per unit, compared to a net loss applicable to limited partners of $263.3 million, or $3.61 per unit, in 2012.

Fourth quarter earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was -$192.3 million compared to fourth quarter 2012 EBITDA of $81.8 million. For the year ended December 31, 2013, EBITDA from continuing operations was $127.2 million, higher than the $107.6 million in 2012.

Shares of NuStar Energy L.P. closed at $52.14 yesterday, with a 52 week range of $36.15-$54.95.

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