On Monday, September 17, analysts at Citigroup (C) upgraded shares of Access Midstream Partners, LP (ACMP). The firm raised its rating on the stock from Neutral to Buy and did not set a price target. As a result of the upgrade, shares of ACMP reacted quite nicely, trading up 0.45% since the opening of trading on Monday. That said, I wanted to examine the company a bit further and take a look at how it compares to some of its industry-based competitors.
Access Midstream Partners, Ltd., which is based in Oklahoma City, Oklahoma, owns, operates, develops, and acquires natural gas gathering systems and other midstream energy assets in the United States. Its assets are located in Texas, Louisiana, Oklahoma, Kansas, Arkansas, West Virginia, and Pennsylvania. The company's operations are focused on the Barnett Shale, Haynesville Shale, Marcellus Shale, and Mid-Continent regions of the U.S. It also provides gathering, treating, and compression services to other producers under long-term contracts. Access Midstream Partners, L.P. operates systems consisting of approximately 3,996 miles of gathering pipelines, servicing approximately 5,622 natural gas wells. Its assets gather approximately 2.868 billion cubic feet of natural gas per day. The company was formerly known as Chesapeake Midstream Partners, L.P. and changed its name to Access Midstream Partners, L.P. in July 2012. Access Midstream Partners, L.P. was founded in 2008 and is headquartered in Oklahoma City, Oklahoma.
Comparable Returns on Assets
Over the last four quarters, ACMP has demonstrated very respectable returns on assets and if similar returns can continue, this catalyst could certainly contribute to the future growth of the company's stock. In the last 12 months, ACMP has demonstrated a return on assets of 4.51%, which when compared to several of the company's competitors, clearly outpaces Crestwood Midstream Partners, LP (CMLP), a return on assets of 4.38%. By examining the numbers a bit closer, we see that ACMP slightly outpaces CMLP in terms of return on assets by a ratio 1.02 to 1.
Profit Margin Comparisons
In my opinion, a company's margins can often be considered one of the more important key catalysts to consider before establishing a position. That said, I think the larger the profit margin, the more attractive the company, and vice versa. In the last 12 months, ACMP has demonstrated a profit margin of 35.63%, which outpaced the profit margins of CMLP and Magellan Midstream Partners, LP (MMP) by a pretty fair margin. It should be noted that CMLP demonstrated a profit margin of 24.22% and MMP demonstrated a profit margin of 18.73% over the same period. By examining the numbers a bit closer, we see that ABB outpaces CMLP in terms of profit margin by a ratio 1.47 to 1 and MMP by a ratio of 2.01 to 1.
CMLP, in my opinion, is one of the better companies within the MLP, and more specifically, the midstream sector, and if the company can continue to outpace the competition, we could easily see CMLP surpass the $26.00/share level. If the company can demonstrate an increase in production over the next 12-24 months, I think CMLP could be a winner for years to come.