Analyst Note| Stephen Ellis |
After incorporating cash flows earned by rolling our model and the accretive value of its ongoing buybacks, we are boosting our fair value estimate to $55 per unit from $52. Magellan’s near-growth outlook continues to look weak, as reflected by the collapse in growth spending over the past few years. We also note that returns on invested capital have declined to 11%-12% from 2020-22 versus 14%-15% beforehand, suggesting that new growth investments are struggling at least in the near term. We expect returns to improve as its refined product markets recover, but there are clearly some cracks in Magellan's armor.