- DCP Midstream Partners' (DPM +0.1%) merger with DCP Midstream LLC sparks different reactions from analysts, as Stifel upgrades DPM to Buy with a $42 price target price while RBC downgrades to Sector Perform from Outperform with a $38 target.
- Stifel says the outlook for DPM is much improved, as the combination will significantly improve its asset base while maintaining distribution coverage at ~1.0x; management also announced a number of initiatives for growth capital deployment and plans to boost maintenance capital spending from trough levels in 2016.
- But RBC believes the deal increases DPM's leverage and commodity price exposure and does not address the longer-term burden of incentive distribution rights, and current valuation reflects near-to-medium term growth potential.