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With rising costs and declining commodity prices, this MLP has been disappointing the investors with sub-par results.
In view of the cloudy outlook, investors should avoid this Zacks Rank # 5 (Strong Sell) stock for the time being.
About the Company
Headquartered in Radnor, Pennsylvania, PVR Partners owns and operates a network of natural gas midstream pipelines and processing plants, and owns and manages coal and natural resource properties.
The company operates in two segments--Coal and Natural Resource Management, and Natural Gas Midstream.
Disappointing Fourth Quarter Results
Fourth-quarter 2012 revenue came in at of $270 million, down 6.3% year over year, primarily due to lower contribution from natural gas and natural gas liquids businesses and decline in coal royalties. The revenue was short of consensus estimate.
The weak performance was attributable to a weakening coal market condition, decreasing natural gas and natural gas liquid prices as well as higher operating costs.
Additionally, the company lowered its guidance for 2013 EBITDA, down about 20% for the Coal segment from the earlier guidance, down 12% for the Eastern Midstream and 20% for Midcontinent Midstream segment.
However, the partnership increased the distribution to $0.55 per unit and was paid on February 14. The annualized distribution is $2.20 per unit currently.
Downward Estimates Revisions
The Zacks Consensus Estimate for the first quarter of 2013 has gone down from $0.41 per share, 60 days ago to $0.06 per share at present. For full year 2013 too, the estimate has gone down from $1.35 per share to $0.70 per share.
The company has delivered negative earnings surprises in all four quarters of 2012—with an average surprise of negative 85%.
Further their over-dependence on a limited group of customers for coal royalty and natural gas midstream revenue remain potential headwinds to future earnings. Also, the outlook for coal prices remains bearish.
The Bottom Line
While the yield looks very attractive at the current levels as the share price has declined more than 6% this year, but without earnings growth, we remain concerned about future distributions.
PVR is currently Zacks Rank # 5 (Strong Sell) stock and it also has a longer-term recommendation of “Underperform”.
Given above reasons, we would advise the investors to stay away from this stock for the time being.
Investors looking for exposure to energy sector/oil and natural gas companies could consider Interoil Corp (IOC), which is Zacks #1 (Strong Buy) stock. IOC has an excellent record of positive earnings surprises—an average surprise of 265.24% during 2012.
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