Contrasting Tallgrass Energy Partners (TEP) and Phillips 66 Partners (PSXP)

Phillips 66 Partners (NYSE: PSXP) and Tallgrass Energy Partners (NYSE:TEP) are both mid-cap energy companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, dividends, earnings, profitability, risk and institutional ownership.

Insider and Institutional Ownership

36.9% of Phillips 66 Partners shares are held by institutional investors. Comparatively, 61.8% of Tallgrass Energy Partners shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Phillips 66 Partners has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500. Comparatively, Tallgrass Energy Partners has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500.

Earnings and Valuation

This table compares Phillips 66 Partners and Tallgrass Energy Partners’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Phillips 66 Partners $1.17 billion 5.29 $461.00 million $2.55 19.95
Tallgrass Energy Partners $605.12 million 4.88 $263.52 million $3.74 10.78

Phillips 66 Partners has higher revenue and earnings than Tallgrass Energy Partners. Tallgrass Energy Partners is trading at a lower price-to-earnings ratio than Phillips 66 Partners, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Phillips 66 Partners and Tallgrass Energy Partners, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Phillips 66 Partners 0 5 6 0 2.55
Tallgrass Energy Partners 0 4 7 0 2.64

Phillips 66 Partners currently has a consensus target price of $58.20, indicating a potential upside of 14.41%. Tallgrass Energy Partners has a consensus target price of $53.25, indicating a potential upside of 32.13%. Given Tallgrass Energy Partners’ stronger consensus rating and higher probable upside, analysts plainly believe Tallgrass Energy Partners is more favorable than Phillips 66 Partners.

Profitability

This table compares Phillips 66 Partners and Tallgrass Energy Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Phillips 66 Partners 44.16% 26.73% 11.05%
Tallgrass Energy Partners 64.13% 27.58% 11.52%

Dividends

Phillips 66 Partners pays an annual dividend of $2.71 per share and has a dividend yield of 5.3%. Tallgrass Energy Partners pays an annual dividend of $3.86 per share and has a dividend yield of 9.6%. Phillips 66 Partners pays out 106.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Tallgrass Energy Partners pays out 103.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Phillips 66 Partners has raised its dividend for 4 consecutive years and Tallgrass Energy Partners has raised its dividend for 4 consecutive years. Tallgrass Energy Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Tallgrass Energy Partners beats Phillips 66 Partners on 10 of the 15 factors compared between the two stocks.

About Phillips 66 Partners

Phillips 66 Partners LP (Phillips 66) owns, operates, develops and acquires fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines, terminals and other transportation and midstream assets. The Company’s assets consist of systems, such as Clifton Ridge Crude System, Eagle Ford Gathering System, Ponca Crude System, Billings Crude System, Borger Crude System, Sweeny to Pasadena Products System, Hartford Connector Products System, Gold Line Products System, Cross-Channel Connector Products System, Ponca Products System, Billings Products System, Bayway Products System, Standish Pipeline, Borger Products System, River Parish NGL System, Medford Spheres, Bayway Rail Rack, Ferndale Rail Rack, Sand Hills/Southern Hills Joint Ventures, Explorer Pipeline Joint Venture, Bakken Joint Ventures, Bayou Bridge Pipeline Joint Venture, STACK Pipeline Joint Venture, and Sweeny Fractionator and Clemens Caverns.

About Tallgrass Energy Partners

Tallgrass Energy Partners, LP owns, operates, acquires and develops midstream energy assets in North America. The Company operates through three segments: Crude Oil Transportation & Logistics, Natural Gas Transportation & Logistics and Processing & Logistics. The Crude Oil Transportation & Logistics segment includes the ownership and operation of a Federal Energy Regulatory Commission (FERC) crude oil pipeline system, and crude oil storage and terminaling facilities. The Natural Gas Transportation & Logistics segment is engaged in the ownership and operation of FERC regulated interstate natural gas pipelines and integrated natural gas storage facilities. The Processing & Logistics segment is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities; the provision of water business services primarily to the oil and gas exploration and production industry, and the transportation of natural gas liquids (NGLs).

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