3 Refining & Marketing MLPs Poised to Defy Bearish Trends

The Zacks Oil and Gas - Refining & Marketing MLP industry faces notable headwinds. Inflation and economic slowdowns are weighing on fuel demand and compressing margins. Lower commodity prices and uncertainty around tariffs, especially on steel, could further strain midstream earnings. Analyst sentiment reflects this, with industry earnings estimates for 2025 and 2026 trending lower. Still, not all is bleak. Despite a lowly industry rank, some names are bucking the trend. Midstream firms with fee-based models and diversified infrastructure are showing resilience. The industry has gained nearly 25% in the past year, outperforming both the S&P 500 and the broader energy sector. Valuation also appears reasonable, with the industry trading well below the S&P 500 average. Within this space, Targa Resources TRGP, Sunoco LP SUN and Global Partners LP GLP stand out with solid fundamentals, strong networks and income stability. These stocks offer investors a defensible position in a shaky macro environment.

Industry Overview

Master limited partnerships (or MLPs) differ from regular stocks since interests in them are referred to as units, and unitholders (not shareholders) are partners in the business. Importantly, these low-risk hybrid entities bring together the tax benefits of a limited partnership with the liquidity of publicly traded securities that earn a stable income. The assets owned by these partnerships are typically oil and natural gas pipelines and storage/infrastructure facilities. The Zacks Oil and Gas - Refining & Marketing MLP industry is a sub-sector of this business model. These firms operate refined product terminals, storage facilities and transportation services. They are involved in selling refined petroleum products (including heating oil, gasoline, residual oil, jet fuel, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum).

3 Trends Defining Oil and Gas - Refining & Marketing MLP Industry's Future

Economic Slowdowns and Inflation Risks: Despite operational efficiencies, refining and marketing MLPs remain sensitive to macroeconomic pressures, such as inflation and potential recession. Persistent inflation and weaker demand could impact volumes and profit margins of these entities. A slowdown in global economic activity could reduce fuel consumption, tightening margins across midstream assets.

Midstream Models Offer Resilience Amid Volatility: Midstream operators are proving the strength of integrated, fee-based business models in today’s unpredictable energy landscape. Even amid global price fluctuations and winter-related volume disruptions, they have been posting stable earnings. Majority of their revenues is fee-based, providing consistent cash flows even during weaker commodity pricing. As more producers prioritize high-return drilling in proven basins like the Permian, midstream operators with robust infrastructure and diversified logistics networks stand to benefit from stable growth, strong capital returns, and improved pricing power over time.

Lower Commodity Prices and Tariffs Could Pressure Margins: Despite the structural advantages of midstream models, the sector isn’t immune to macroeconomic pressures. Falling crude price curves and ongoing global trade uncertainties, including steel tariffs, pose headwinds. Meanwhile, any prolonged weakness in commodity prices could impact customer drilling programs, slowing volume growth and potentially impacting long-term forecasts. With rising capex needs and global volatility in the mix, margin pressures could emerge across the industry if conditions worsen.

Zacks Industry Rank Indicates Bearish Outlook

The Zacks Oil and Gas – Refining & Marketing MLP is a six-stock group within the broader Zacks Oil – Energy sector. The industry currently carries a Zacks Industry Rank #166, which places it in the bottom 33% of 246 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates fairly dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. While the industry’s earnings estimates for 2025 have gone down 7.5% in the past year, the same for 2026 have fallen 2.3% over the same timeframe.

Despite the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Outperforms Sector & S&P 500

The Zacks Oil and Gas – Refining & Marketing MLP industry has fared better than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past year.

The industry has gained 24.9% over this period compared to the broader sector’s decrease of 6.5%. Meanwhile, the S&P 500 has gone up 11.2%.

One-Year Price Performance

Industry's Current Valuation

Since midstream-focused oil and gas partnerships use fixed-rate debt for most of their borrowings, it makes sense to value them based on the EV/EBITDA (enterprise value/ earnings before interest tax depreciation and amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.

On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) ratio, the industry is currently trading at 10.83X, significantly lower than the S&P 500’s 16.60X. It is, however, well above the sector’s trailing 12-month EV/EBITDA of 4.69X.

Over the past five years, the industry has traded as high as 11.87X and as low as 6.36X, with a median of 9.06X, as the chart below shows.

Trailing 12-Month Enterprise Value-to-EBITDA (EV/EBITDA) Ratio (Past Five Years)

 

 

3 Stocks in Focus

Global Partners LP: It is a midstream logistics and fuel marketing firm headquartered in Waltham, MA. It operates one of the Northeast’s largest terminal networks for petroleum and renewable fuels. With around 1,600 retail locations, GLP is also a major supplier and operator of gasoline stations and convenience stores. Its crude-by-rail system adds strategic flexibility, while recent market volatility has helped strengthen its balance sheet and support long-term growth.

The 2025 Zacks Consensus Estimate for Global Partners indicates 17.8% year over year earnings per unit growth. Global Partners pays out 74.50 cents quarterly distribution ($2.98 per unit annually), which gives it a 5.9% yield at the current unit price. Valued at around $1.7 billion, this Zacks Rank #1 (Strong Buy) stock has gained some 12.9% in a year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: GLP

Targa Resources: Based in Houston, Targa Resources is a leading midstream player specializing in natural gas and NGL services. It operates an integrated network that spans gathering, processing, fractionation, storage, and exports—especially in the Permian Basin. TRGP’s scale, efficient cost structure, and improved financial flexibility support dividend growth and capital returns. With strategic assets and a clear growth plan, Targa Resources is well-positioned to benefit from rising U.S. energy demand. 

The 2025 Zacks Consensus Estimate for TRGP indicates 39.2% earnings per share growth over 2024. The firm, which recently instituted a 33% year-over-year increase to its 2025 common dividend, has a Growth Score of B. Valued at around $36.6 billion, this Zacks Rank #3 (Hold) stock has surged 41.5% in a year.

Price and Consensus: TRGP

Sunoco LP: Sunoco, a Dallas-based master limited partnership, is a major distributor of motor fuels across more than 40 U.S. states, servicing roughly 10,000 locations. Backed by Energy Transfer, Sunoco is expanding through strategic acquisitions like NuStar and TanQuid, enhancing its footprint in both the United States and Europe. With strong retail contracts and a growing role in fuel logistics, SUN aims to maintain a balanced and resilient portfolio over time.

The 2025 Zacks Consensus Estimate for Sunoco indicates 21% earnings per unit growth over 2024. SUN has a market capitalization of $8.7 billion. The midstream operator pays out 89.76 cents quarterly distribution ($3.5904 per unit annually), which gives it a 6.3% yield at the current unit price. Boasting a Value Score of A, this Zacks Rank #3 partnership has gained 6.5% in a year.

Price and Consensus: SUN

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Targa Resources, Inc. (TRGP): Free Stock Analysis Report
 
Sunoco LP (SUN): Free Stock Analysis Report
 
Global Partners LP (GLP): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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