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Enterprise Products (EPD) Q1 Earnings & Sales Beat Estimates

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Enterprise Products Partners L.P.’s (EPD - Free Report) first-quarter 2018 adjusted earnings per limited partner unit of 39 cents beat the Zacks Consensus Estimate of 38 cents. The bottom line improved from earnings of 36 cents in the year-ago quarter.

Quarterly distribution at Enterprise Products improved 3% year over year to 42.75 cents per common unit, or $1.71 per unit on an annualized basis. Adjusted distributable cash flow was at a record level of $1.4 billion, up 27% from the prior-year quarter and provided coverage of 1.5x. The partnership retained $458 million of cash flow, thereby reducing the need to issue more equity for capital growth projects.

Revenues in the quarter jumped to $9,298.5 million from $7,320.4 million in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $7,832 million.

Higher contribution from three of the partnership’s four segments fueled the growth.

 

Q1 Segmental Performance

Gross operating income in the NGL Pipeline & Services segment increased to $885 million from $856 million in the year-ago quarter, beating the Zacks Consensus Estimate of $855 million. The upside can be attributed to overall volume increase (except fee-based natural gas processing), and NGL pipelines and storage business, in which operating margin increased $54 million. 

Natural Gas Pipeline and Services’ gross operating income increased to $198 million, reflecting a year-over-year change of 16%, beating the Zacks Consensus Estimate of $176 million. The upside was driven by increased firm capacity in the Texas Interstate system and higher treating revenues, as well as firm gathering volumes in Haynesville gathering system.

Gross operating income from the Crude Oil Pipelines & Services segment was $220 million compared with $265 million in the prior-year quarter, lagging the Zacks Consensus Estimate of $289 million. The decrease was mainly due to Midland-to-ECHO pipeline system’s $60 million loss in the quarter and $46 million decline in gross operating margin from other marketing activities.

Petrochemical & Refined Product Services segment reported gross operating income of $272 million, reflecting a rise of 50% year over year. It also beat the Zacks Consensus Estimate of $198 million. The positives can be attributed to higher sales margins at the partnership’s Mont Belvieu propylene fractionators, butane isomerization and related operations, and octane enhancement and high-purity isobutylene business.

Financials

During the quarter, the partnership’s capital investments were $1.1 billion. Outstanding total debt principal as of Mar 31, 2017 was $25.6 billion. The partnership had consolidated liquidity of $5 billion by the quarter-end, including unrestricted cash on hand and available borrowing capacity.

Guidance

For 2018, the partnership estimates growth capital spending of $3.2-$3.4 billion and $315 million for sustaining capital expenditures.

Zacks Rank and Stocks to Consider

Houston, TX-based Enterprise Products currently carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Nine Energy Service, Inc. (NINE - Free Report) , Oasis Midstream Partners LP and CNOOC Limited (CEO - Free Report) . While Nine Energy Service sports a Zacks Rank #1 (Strong Buy), Oasis Midstream and CNOOC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.

Houston, TX-based Oasis Midstream is an integrated energy partnership. The company’s revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its earnings are expected to increase 337.2%.

Hong Kong-based CNOOC is an integrated energy company. The company’s top line for 2018 is anticipated to improve 49% year over year, while its bottom line is expected to increase 82.8%.

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