By Seeking Profits:
Shares of Linn Energy (NASDAQ:LINE) rallied over 2.3% on Thursday after investors digested the company’s second results. Linn has been a controversial company as analysts like Hedgeye’s Kevin Kaiser have suggested the distribution is too high and that a cut is inevitable. Overall, this quarter was a decent one, and Linn is in no danger of a distribution cut in the immediate future. Still, significant fundamental problems remain, and the company announced a confusing and troubling share buyback program that should give investors pause. I continue to suggest long-term investors sell Linn and invest in other energy companies.
In the quarter, Linn energy earned $0.56 per unit compared to expectations of $0.42 (operating and financial data available here). Rightly or wrongly, most investors don’t focus on GAAP net income because MLPs are owned mainly for the distribution. As a consequence, investors look for distributable cash flow (“DCF”), which is
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