In this article, we will take a look at some of the best pipeline stocks.
The global pipeline market is part of the energy sector, influenced by the demand and supply of energy. According to a report by Fortune Business Insights, the global pipeline transportation market reached a valuation of $20.57 billion in 2023. Forecasts indicate this market will expand to $34.38 billion by 2032. This growth trajectory represents a Compound Annual Growth Rate (CAGR) of 5.43% throughout the projected period. Notably, North America holds the leading position in the global market in 2023, capturing a 43.32% share.
The United States possesses an extensive and intricate network of pipelines, vital for the transportation and storage of oil, natural gas, and other energy products. The U.S. pipeline network is a critical component of the national energy infrastructure, facilitating the safe and efficient transportation of oil, natural gas, and NGLs, supporting economic activity and ensuring energy security. This infrastructure forms the backbone of the nation’s energy sector, ensuring the efficient movement of resources from production sites to consumers. In a report published by IBISWorld, the Oil Pipeline Transportation sector in the US stands at a value of $15.9 billion in 2024.
The pipeline industry is continuously evolving, driven by technological advancements and changing energy demands. Innovations in pipeline materials, monitoring systems, and leak detection technologies are improving safety and efficiency. The growing focus on reducing greenhouse gas emissions is also driving the development of pipelines for transporting carbon dioxide for sequestration and hydrogen for clean energy applications.
The IEEFA report highlighted that the fossil fuel sector has underperformed the broader market in 7 of the last 10 years. This shows a general trend of underperformance of the fossil fuel sector, which pipelines are a part of, when compared to the general market. However, during terms of economic recovery, increased industrial activity and consumer spending typically lead to higher energy demand, benefiting pipeline companies, leading to improved performance. Especially in terms of the current President’s administration.
Companies in the fossil fuel segment could benefit from the current administration’s potential rollback of climate initiatives, while renewables could face headwinds from reduced government support.
Pipeline companies have underperformed the overall market performance, especially over the past 5 years where TECH firms have been the centre of attention due to the popularity of AI amongst investors. This highlights an opportunity for investors seeking stable dividend yields or steady income streams. The pipeline industry can be attractive to investors during economic recovery due to its potential for stable cash flow and dividend payouts.
Master Limited Partnerships (MLPs) offer distinct advantages over traditional U.S. stocks, primarily centred on their unique tax structure and resulting higher yields. Unlike corporations that face double taxation, MLPs are pass-through entities, meaning profits are distributed directly to unitholders (investors) without incurring corporate income tax. The current tax rate for corporations in the US is 21%, compared to MLP stocks which pay between 10-20%. This can translate to consistent distributions, often yielding higher than traditional dividend-paying stocks; with yields often to be in the range of 5%-8%, or more, whereas the market’s average dividend yield is much lower, generally around 2%. Given this, we will take a look at some of the best pipeline stocks.
QiuJu Song/Shutterstock.com
Our Methodology
For this list, we used the Finviz stock screener to filter out pipeline and MLP stocks. Next, we manually searched for the average upside potential of each stock and selected 10 stocks with the highest values. The list below is ranked in ascending order of the upside potential as of March 14.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Global Partners LP (NYSE:GLP)
Upside Potential According to Analysts: 3.98%
Global Partners LP (NYSE:GLP) is a major player in the logistics and distribution of diverse fuels across the US and Canada. The company has a portfolio consisting of gasoline, distillates, renewable fuels, crude oil, and propane, serving wholesalers, retailers, and commercial clients. It operates in three segments, namely the wholesale, gasoline distribution & station operations, and the commercial segments. The Wholesale segment focuses on heating oil and gasoline distribution, using rail, barges, trucks, and pipelines. The Gasoline Distribution arm supplies branded and unbranded gasoline to stations, operates convenience stores, and provides related services. The Commercial segment caters to public sector and industrial clients with various fuels and custom blends. They are also involved in transporting petroleum and renewable fuels via rail from the US and Canada.
Global Partners LP (NYSE:GLP) reported a revenue of $4.19 billion in Q4 of 2024, missing estimates by $1.62 billion. EPS was $0.52 and EBITDA of $97.8 million. President and CEO of Global Partners LP (NYSE:GLP) Eric Slifka spoke during the earnings report call on the impact of tariffs, specifically Canada. He stated:
“Let me briefly address the steps we are taking to prepare for the potential implementation of tariffs on oil and gas imports, particularly from Canada and Europe. We continue to actively monitor global economic conditions and the evolving supply landscape, holding as we always do daily meetings, and additional scenario planning to assess potential impacts of any proposed — imposed and proposed tariffs.
In summary, as evidenced by our results, our diverse asset portfolio continues to drive strong performance. With our expanded operating footprint, greater access to critical pipeline and marine infrastructure, and a strong balance sheet, we are well positioned to leverage our supply terminal, and marketing expertise to seize growth opportunities and create value for our unit holders.”
Global Partners LP (NYSE:GLP) has a market capitalization of $1.83 billion, with a consensus among analysts of the trading twelve month average price at $56.0, an upside of 3.98%.
9. MPLX LP (NYSE:MPLX)
Upside Potential According to Analysts: 5.94%
MPLX LP (NYSE:MPLX) is a subsidiary of Marathon Petroleum Corporation, a prominent US midstream energy company established in 2012 and headquartered in Findlay, Ohio. The company operates in two segments, namely logistics & storage, and gathering & processing segments. It handles natural gas gathering, processing, and transportation; NGLs fractionation, storage, and marketing; and crude oil and refined product logistics. They also manage produced water and engage in residue gas and condensate sales.
MPLX LP (NYSE:MPLX) operations extend to inland marine businesses, including barge transportation of diverse products and a marine repair facility. Additionally, they are involved in fuel distribution and operate refining logistics, terminals, rail facilities, and storage caverns. MPLX runs terminal facilities for the receipt, storage, and blending of refined petroleum products via pipeline, rail, marine, and road transport. MPLX GP LLC serves as its general partner. Their extensive infrastructure supports the flow of energy across the US.
MPLX LP (NYSE:MPLX) Q4 2024 earnings report shows revenue of $3.06 billion, missing analysts’ estimates by $10.10 million, while EPS was $1.07. EBITDA for the fourth quarter was $1.8 billion, taking the total EBITDA of 2024 to $6.8 billion.
Out of the 16 analysts following MPLX LP (NYSE:MPLX) on Wall Street, a consensus on the twelve month trading price of $56 reveals an upside of 5.94%
Hedge Fund Resource Center