Core Insights - The Zacks Oil and Gas - Refining & Marketing MLP industry is facing significant challenges due to a 5% decline in gasoline demand in Q3 2024, driven by fuel efficiency improvements, rising electric vehicle adoption, and changing consumer habits [1][3] - Rising interest rates are increasing debt costs, which may limit investment in infrastructure and acquisitions, thereby slowing overall industry momentum [1][5] - Companies with stable, fee-based revenue models, such as Targa Resources, Global Partners LP, and CrossAmerica Partners LP, are better positioned to withstand market volatility [1] Industry Overview - Master Limited Partnerships (MLPs) are unique entities that combine the tax benefits of limited partnerships with the liquidity of publicly traded securities, typically focusing on oil and natural gas pipelines and storage facilities [2] - The Zacks Oil and Gas - Refining & Marketing MLP industry operates refined product terminals, storage facilities, and transportation services, selling various refined petroleum products and non-energy materials [2] Trends Impacting the Industry - The continued decline in gasoline demand poses a long-term challenge for fuel retailers, with same-store retail volume remaining flat [3] - MLPs provide a reliable investment avenue in an unpredictable oil market, generating stable, fee-based revenue through long-term contracts [4] Financial Pressures - Rising interest rates are making debt more expensive, impacting profitability and limiting growth initiatives for MLP operators [5] - The Zacks Oil and Gas - Refining & Marketing MLP industry currently holds a Zacks Industry Rank of 220, placing it in the bottom 11% of 248 Zacks industries, indicating dull near-term prospects [6][7] Performance Metrics - The industry has outperformed the broader Zacks Oil - Energy Sector and the S&P 500 over the past year, gaining 62.3% compared to the sector's 6.4% increase and the S&P 500's 24.4% rise [9] - The industry is currently trading at an EV/EBITDA ratio of 11.78X, lower than the S&P 500's 17.75X but above the sector's 4.44X [10] Company Highlights - Targa Resources: A leading provider of integrated midstream services, with a projected 28.2% EPS growth for 2025 and a 33% increase in its common dividend [13] - Global Partners LP: Focused on gasoline and renewable fuels distribution, with a 17.8% year-over-year earnings growth estimate for 2025 and a 4.9% yield [16] - CrossAmerica Partners LP: A wholesale distributor of motor fuels, with a projected 69.2% earnings growth for 2025 and a 9% yield [17]
3 Solid Options Amid Refining & Marketing MLP Industry Tumult