DKL Logistics LP: Record Earnings, 11% Yield, Major Expansion

Core Insights - DKL Logistics LP is expanding its operations through acquisitions and diversifying its sales base, which is expected to increase EBITDA by at least 14% [2][6][7] Company Profile - DKL Logistics LP, based in Brentwood, Tennessee, is a publicly traded master limited partnership formed in 2012 by Delek US Holdings, Inc. to manage logistics and marketing assets for crude oil and refined products [3] - The company operates primarily in the southeastern United States and west Texas, supporting Delek's refining operations [3] Holdings and Operations - DKL's operations include gathering, transporting, and storing crude oil, as well as marketing and distributing refined products [4] - The company has a significant infrastructure, including a 200-mile gathering system and over 800 miles of transportation pipelines [5] Acquisitions and Expansion - On August 6, 2024, DKL announced the acquisition of Delek US's interest in the Wink to Webster pipeline, which is expected to enhance asset quality and diversify operations [6] - The acquisition is projected to increase third-party EBITDA contribution from 50% to 64% and diversify EBITDA sources across various segments [6][7] Financial Performance - DKL's Q2 2024 saw record EBITDA of $102.4 million, a 10% increase from Q2 2023, with a 9.7% growth in EBITDA and 11% growth in distributable cash flow [13][14] - The company reported a net income of $73.71 million for Q1-2 2024, reflecting a 6.43% increase year-over-year [14] Dividends - DKL recently increased its distribution from $1.07 to $1.09, marking the 46th consecutive quarterly increase, yielding 11.18% as of August 28, 2024 [15][16] Analyst Ratings and Price Targets - DKL received upgrades from Citigroup and Truist, with price targets of $45 and $46, respectively, indicating potential upside from the current price of $39 [28][29][31] Valuations - DKL is currently trading at a low Price/DCF ratio of 6.66X, significantly below midstream averages, suggesting potential undervaluation [32][34]