Can Inergy Propel You to Profits?
Inergy, L.P. (NYSE:NRGY) engages in the storage and transportation of natural gas and natural gas liquids (NGL) in the United States and Canada. The company owns a 66% interest in Inergy Midstream, another publicly traded entity.
It is important to note that Inergy, L.P. (NYSE:NRGY) is a Master Limited Partnership, which means that its distributions to shareholders are not taxed as ordinary or qualified dividends. Shareholders receive a K-1 at the end of the year and its 5% distribution yield, while nice, presents a more challenging tax treatment for shareholders.
The company is expected to earn 15 cents per share this year, and increase nicely to 44 cents per share next year. It lost money in the quarter ending in March of 2013, which came in below analyst forecasts. This has caused the full-year estimate and next year’s estimate to be decreased.
Based on its most recent 10-Q, revenue decreased by $212 million in March of 2013 compared to March of 2012. It contributed its former retail business to Suburban Propane Partners, however, and in the year-ago period these sales amounted to $321 million. This shows us that the revenue for the quarter ending in March of 2013 was actually pretty good. Marketing, supply, and logistics revenue increased by a strong 31.5% in the first quarter of 2013 compared to the year ago period.
With a market capitalization of $2.97 billion, its 66% ownership stake in Inergy Midstream amounts to a current value (based on market price) of about $1.27 billion. This is an exciting fact as a potential spin-off of this stake to shareholders could unlock more value.
Conclusion
I like Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) and Inergy, L.P. (NYSE:NRGY) here based on this analysis. At the current time, I would consider adding these to a mid-cap portfolio.
Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) offers a potential investor the chance to cash in on rising gold prices if those resume, in addition to offering exposure to emerging markets. I believe emerging markets will have strong years over the long term in general, and this is a quality stock based on its solid earnings.
Inergy, L.P. (NYSE:NRGY) has good revenue growth in its existing segments in addition to having a large equity interest in the other company. I like the opportunity it presents investors here and a 5% distribution yield at current levels sure doesn’t hurt either.
The article 3 Growing Mid Caps for the Long Term originally appeared on Fool.com and is written by Anthony Parsons.
Anthony Parsons has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anthony is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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