3rd Quarter MMP and HCN November 10, 2010Posted by shaferfinancial in Finance, Uncategorized.
Tags: Berkshire Hathaway, Health Care REIT [HCN], Magellan Midstream Partners
These will be short and sweet with the end of year coming in 3 months.
MMP had a great quarter with $.51 earnings per unit. This was above the guidance of $.48. It also had some negative adjustments in there for mark to market adjustments that dropped it $.03. Operating profit was $82.3M compared to $74.8M in 2009. Shipment volumes were up 29%, with diesel shipments up 25%. Storage revenue was up $2.5M compared to last year. For oil products the economy is picking up. There was decreases in ammonia pipeline activity due to customers wanting the maintenance work to be substantially done by the end of the quarter. This meant the ammonia line was down for most of the quarter.
The longhorn line demand is larger than expected. Storage capacity is increasing with marginal increases in pipeline coming on line. The acquisition from BP is going well and has itself had high demand. They still intend to raise distributions in the near future [they just raised it last quarter].
As to the price, it has gone through the roof to $56.31 from $46.37 at the start of the quarter.
Even though I am very happy with its performance I will not be buying anymore at this price.
HCN also had a good quarter with FFO to $.79 with FAD to $.74 both up 3% from last year. A cash dividend of $.69 was paid its 159th consecutive dividend. The real story is about the end of a change in property mixes that started 4 years ago. It completed $700M in development bringing the year total to over $1.6B. The year long total should be around $2.5B. The move away from nursing facilities to senior housing and MOB has moved HCN further away from dependence on medicare and medicaid payments. Around 75% of the revenue now comes from private-pay sources. The MOB occupancy remains high at 93%. Senior housing occupancy at 88% with skilled nursing at 85%. Entrance fee properties, a troubled area due to the recession, has seen occupancy increase from 61% to 65% since the last quarter. Debt levels remain low at 41% with interest coverage of 3.6 times.
Bottom line is that HCN has repositioned itself, using cheap debt and additional capital to ramp up earnings over the next 5 years significantly. It is no longer dependent on triple-net leases, government payments or skilled nursing facilities for its growth.
Current price is $48.33, which is up from $41.98 at the beginning of the quarter. I think the price is a little high for my taste right now, but really don’t expect it to go much lower. If one was interested they might try to purchase on the dips.
Bottom line for me is that I am very happy with my three equities [BRKB, MMP, HCN] and will continue to own all three. If I have some more investment dollars it will be directed at BRKb, because I think it is still relatively cheap.