Citigroup (NYSE:C) said in a note to clients that they're raising the price target on propane distributor and retailer Inergy, LP (NYSE:NRGY), while maintaining a "Hold" on them.
The financial giant is also raising "...2011 EBITDA estimate by -14% to $432.4 million and our EPU estimate to $1.14 ($1.08 previously). Despite a significant increase in our 2011 cash flow expectations, distribution coverage remains below 1.0x as we account for PIK units as part of the total number of units outstanding. As a result, we expect distributions to remain flat over the next 12-months.
"While we view NRGY's growing Midstream segment as positive long-term, we are cautious on natural gas storage margins near-term. We also note that beyond 2011 nearly all of the partnership's growth projects are natural gas storage expansions that potentially could get delayed if storage margins remain weak. As a result, we are maintaining our Hold... rating on NRGY, but are slightly increasing our target price to $40.50 to reflect the acquisition."
Inergy dropped to $40.67, falling $0.13, or 0.32 percent as of 2:01 PM EDT.
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