Genesis Energy, L. P. (GEL) just announced its 14th consecutive quarterly dividend increase as the energy transporter continues to see increased profits. The stock is cheap. GEL trades at only 7x forward earnings and has a current dividend yield of 11.80%.

Company Description

Genesis Energy operates as an energy master limited partnership (“MLP”) which transports energy and refines products throughout Texas, Louisiana, Arkansas, Mississippi, Alabama and Florida. Its customers include the integrated oil companies as well as independent oil producers.

The company has 4 business segments:

1. Pipeline Transportation Division which transports crude oil, carbon dioxide and natural gas
2. Refinery Services Division which processes sour gas streams to remove sulfur
3. Supply and Logistics Division which transports, stores and supplies energy products to customers
4. Industrial Gases Division which produces and supplies industrial gases like carbon dioxide and syngas.

14th Consecutive Quarterly Dividend Increase

As a MLP, Genesis Energy distributes a large portion of its income to unit holders. On Jan 8, the company announced a distribution payment for the quarter ended Dec 31, 2008 which rose 16% over the fourth quarter 2007. The 33 cents per common unit distribution is payable on Feb 13 for unitholders of record as of Feb 3.

Surprised on Third-Quarter Estimates by 19.05%

On Nov 6, Genesis Energy reported third-quarter 2008 earnings that beat analysts’ estimates by 4 cents a share.

Net income jumped 535.29% to $10.8 million, or 25 cents per unit, from $1.7 million, or 7 cents, in the prior year. Analysts expected 21 cents. Third quarter 2007 only saw the impact of the Davison businesses for 2 months of that quarter.

The company saw no lasting effects from the 2 Gulf hurricanes during the quarter.

Solid Cash Position

Even with its large distributions, Genesis still has a strong cash position. At the end of the third quarter, the company had $170 million in cash and debt commitments.

Consensus Estimates Rise for 2008

Given the company’s recent solid track record, covering analysts are fairly optimistic about the fourth-quarter 2008 and full-year 2008. Fourth-quarter estimates are up a penny in the last 30 days to 23 cents. 2008 consensus estimates rose 2 cents to 69 cents in the last 90 days.

For 2009, analysts are projecting 51.44% year-over-year earnings growth, with consensus estimates of $1.05 per unit.

Analysts are also bullish on long term growth, forecasting 20% earnings growth over the next 5 years.

GEL is scheduled to report fourth-quarter and full-year earnings on Feb 25.

Value Fundamentals

Genesis Energy is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 3 out of the last 4 quarters.

GEL is trading at only 7.4x forward earnings. It has a price-to-book of 0.71. Its PEG ratio is only 0.60. As an MLP, Genesis pays a quarterly distribution with a current spectacular yield of 11.80%.

Content Courtesy: Zacks Investment Research

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