3 Refining & Marketing MLPs Poised to Defy Bearish Trends

Core Viewpoint - The Zacks Oil and Gas - Refining & Marketing MLP industry is facing significant challenges due to inflation, economic slowdowns, and lower commodity prices, which are compressing margins and affecting earnings estimates for 2025 and 2026. However, some midstream firms with fee-based models and diversified infrastructure are showing resilience and have outperformed the broader market over the past year [1][10]. Industry Overview - Master limited partnerships (MLPs) operate differently from regular stocks, with unitholders being partners in the business. These entities 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]. Trends Impacting the Industry - Economic slowdowns and inflation risks are significant concerns, as they can impact volumes and profit margins for refining and marketing MLPs. A global economic slowdown could lead to reduced fuel consumption, further tightening margins [3]. - Midstream operators are demonstrating resilience through integrated, fee-based business models, which provide stable earnings despite global price fluctuations and seasonal disruptions [4]. - Lower commodity prices and uncertainties around tariffs, particularly on steel, could exert pressure on margins, potentially affecting customer drilling programs and long-term forecasts [5]. Industry Ranking and Outlook - The Zacks Oil and Gas - Refining & Marketing MLP industry currently holds a Zacks Industry Rank of 166, placing it in the bottom 33% of 246 Zacks industries, indicating a bearish outlook [6][8]. - Earnings estimates for the industry have declined, with a 7.5% decrease for 2025 and a 2.3% decrease for 2026 over the past year, reflecting a negative sentiment among analysts [9]. Performance Metrics - The industry has outperformed both the broader Zacks Oil - Energy Sector and the S&P 500 over the past year, gaining 24.9% compared to a 6.5% decrease in the sector and an 11.2% increase in the S&P 500 [10]. - The current valuation of the industry, based on the trailing 12-month EV/EBITDA ratio, is 10.83X, significantly lower than the S&P 500's 16.60X, indicating a reasonable valuation relative to the broader market [13]. Notable Companies - Global Partners LP: A midstream logistics and fuel marketing firm with a strong terminal network and retail presence. It has a projected 17.8% year-over-year earnings per unit growth for 2025 and offers a 5.9% yield [15][16]. - Targa Resources: A leading midstream player specializing in natural gas services, with a projected 39.2% earnings per share growth for 2025. It has recently increased its dividend by 33% year-over-year [18][19]. - Sunoco LP: A major distributor of motor fuels with a projected 21% earnings per unit growth for 2025. It offers a 6.3% yield and is expanding through strategic acquisitions [21][22].