Wells Fargo Downgrades LRR Energy, L.P. (LRE) to Market Perform on Valuation
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Price: $14.85 -0.27%
Rating Summary:
3 Buy, 5 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
Rating Summary:
3 Buy, 5 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 21 | Down: 24 | New: 29
Trade LRE Now!
Wells Fargo downgraded LRR Energy, L.P. (NYSE: LRE) from Outperform to Market Perform with an $18-$20 valuation range.
The firm comments, "We are downgrading our rating on LRE to Market Perform from Outperform primarily due to valuation. Year-to-date, LRE units are up 10% versus 9% for the Wells Fargo Securities MLP Index and 5% for the S&P 500. With LRE now trading within our valuation range, we believe the stock is fairly discounting our expectation for distribution growth over the next 5 years of 1-2%. While we continue to view LRE’s yield of 10% as attractive and secure, we would highlight MCEP and LGCY as upstream MLPs with similar yields (i.e. 9%) but higher growth potential (average est. 5-year CAGRs of 4-5%). Finally, we would note that LRE’s recently completed $21MM drop down increases the partnership’s leverage ratio to 3.3x (absent an equity offering), which compares to the long-term target for upstream MLPs of 2.5x. We are lowering our 2012 and 2013 DCF per unit estimates for LRE to $1.95 and $2.12, respectively, from $1.98 and $2.15 primarily to reflect our revised commodity price deck."
For an analyst ratings summary and ratings history on LRR Energy, L.P. click here. For more ratings news on LRR Energy, L.P. click here.
Shares of LRR Energy, L.P. closed at $18.92 yesterday, with a 52 week range of $12.25-$21.62.
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The firm comments, "We are downgrading our rating on LRE to Market Perform from Outperform primarily due to valuation. Year-to-date, LRE units are up 10% versus 9% for the Wells Fargo Securities MLP Index and 5% for the S&P 500. With LRE now trading within our valuation range, we believe the stock is fairly discounting our expectation for distribution growth over the next 5 years of 1-2%. While we continue to view LRE’s yield of 10% as attractive and secure, we would highlight MCEP and LGCY as upstream MLPs with similar yields (i.e. 9%) but higher growth potential (average est. 5-year CAGRs of 4-5%). Finally, we would note that LRE’s recently completed $21MM drop down increases the partnership’s leverage ratio to 3.3x (absent an equity offering), which compares to the long-term target for upstream MLPs of 2.5x. We are lowering our 2012 and 2013 DCF per unit estimates for LRE to $1.95 and $2.12, respectively, from $1.98 and $2.15 primarily to reflect our revised commodity price deck."
For an analyst ratings summary and ratings history on LRR Energy, L.P. click here. For more ratings news on LRR Energy, L.P. click here.
Shares of LRR Energy, L.P. closed at $18.92 yesterday, with a 52 week range of $12.25-$21.62.
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