MLP Update: Credit Suisse Lowers Estimates For These Two Names

• Midcoast Energy Partners LP (NYSE: MEP) shares are down 20 percent in the last one month, while Enbridge Energy Partners, L.P. (NYSE: EEP) shares have lost 12 percent.
• Credit Suisse’s John Edwards maintained Outperform ratings on both the companies, while reducing their estimates.

Midcoast Energy Partners

The price target for Midcoast Energy Partners remained unchanged at $16. The EPS estimates for FY2 and FY3 have been reduced from $(0.34) to $(0.36) and from $0.16 to $(0.01), respectively.

The revised estimates reflect 8 percent, 13 percent and 18 percent lower gathering and processing volumes in 2016, 2017 and 2018, respectively, “with the Anadarko segment representing the largest relative estimate reductions,” analyst John Edwards mentioned.

The EBITDA estimates for 2016, 2017 and 2018 have been reduced by 0 percent, 3 percent and 4 percent, respectively, with volume declines being partially offset by lower overall G&A and O&M expenses. The capex forecasts have been revised down to reflect aggregate capital spend of about $220mm in 2016, $426mm in 2017 and $525mm in 2018.

Enbridge Energy Partners

The price target for Enbridge Energy Partners remained unchanged at $34. The EPS estimates for FY2 and FY3 have been reduced from $1.33 to $1.03 and from $1.81 to $1.52, respectively.

“Changes to our EEP forecast are primarily reflected in lower Lakehead volumes resulting from a more conservative assumed contribution from Eastern Access (we assume EEP purchases a 15% stake in 1Q16) and the Mainline Expansion,” Edwards wrote.

The EBITDA and DCF estimates have been reduced by about 5 percent and 8-10 percent per annum, reflecting lower assumptions in the Liquids segment and lower MEP forecasts.