3 Areas to Watch When Buckeye Partners Reports

Petroleum products logistics provider Buckeye Partners (NYSE: BPL  ) is set to report first-quater earnings on May 3 before markets open. While Buckeye might be a sleepy Northeast-focused MLP, it has international growth aspirations. That's what makes this such a compelling company to watch. In particular, here are three areas that I'll be watching closely when Buckeye reports.

The numbers
Analysts are expecting revenue of $1.29 billion with earnings of $0.73 which represent increases of 2.4% and 35.2%, respectively. I wouldn't get too worked up if the company misses the earnings number, what's more important as an MLP is its distributable cash flow. Specifically, we're looking for a coverage ratio north of one.

Last quarter the company reported an excellent distribution coverage ratio of 1.32 times which brought the annual average up to 1.04 times. This was a much better showing for the company that saw its coverage ratio dip to just 0.91 times in 2011. What's important here is that the company's growth projects continue to have a real impact on its bottom line.

The growth
Buckeye has been an active acquirer the past few years. In 2011 the company purchased $165 million in pipeline and terminal assets from BP (NYSE: BP  ) as well as its world-class BORCO terminal in the Bahamas. Last year the company acquired the Perth Amboy terminal in the New York Harbor from Chevron (NYSE: CVX  ) for $260 million. Each of these assets came with organic growth opportunities which should begin to hit the bottom line.

The BP assets were being underutilized and Buckeye was able to add 32 new third-party customers which lead to a 34% increase in the assets' adjusted EBITDA. Buckeye has also been investing heavily to grow both Perth Amboy and BORCO as its repositioning these assets to take advantage of catalysts that it sees on the horizon. The Perth Amboy terminal from Chevron could turn into something really special as the company transforms it into an important multi-product storage, blending, and throughput hub for the key New York City market. What's important to look for here is whether the company's growth projects are on track, as well as whether it has identified any additional future growth opportunities.

Given that Buckeye has been an active acquirer the past couple of years, it wouldn't surprise me to see the company make another move soon. Look to see if a deal is announced in conjunction with earnings, or if Buckeye hints that something is on the horizon. The company's last few deals really have hit the bulls-eye in terms of immediate impact to the bottom line and organic expansion opportunities. Another similar deal would continue the company's positive momentum toward growing its cash flow. 

The distribution
The company's assets, whether acquired or grown organically, are not put together for the sake of building an empire. Instead, growth is designed to yield an increase in the company's distribution which has now been stagnant for five consecutive quarters. Until hitting the most recent dry patch, Buckeye had raised its distribution 31 consecutive quarters. I'm sure that longtime Buckeye investors would like to see the company begin a new streak of distribution raises with this quarter.

Foolish bottom line
I made Buckeye my one MLP to buy in April, not because I thought it was going to skyrocket last month but because it's a great long-term holding. Buckeye is an oil-levered MLP with great international exposure and a solid 6.7% distribution. As long as that story remains intact then investors shouldn't have too much to worry about. 

It's easy to forget the necessity of midstream operators that seamlessly transport oil and gas throughout the United States. Buckeye is a bit more unique in that its more levered to oil products and has a nice international component. Investors interested in Buckeye might also want to consider taking a look at Kinder Morgan; its a company that investors should commit to memory due to its sheer size – it's the third-largest energy company in the U.S. – not to mention its enormous potential for profits. In The Motley Fool's premium research report on Kinder Morgan, we break down the company's growing opportunity – as well as the risks to watch out for – in order to uncover whether it's a buy or a sell. To determine whether this dividend giant is right for your portfolio, simply click here now to claim your copy of this invaluable investor's resource.

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