NuStar Earnings Short of Estimate

San Antonio-based publicly traded partnership NuStar Energy L.P. ( NS - Analyst Report ) announced weak fourth quarter profits, hamstrung by higher operating expenses in its storage business.

The owner and operator of crude oil and refined products pipelines and storage facilities reported earnings per unit (EPU) – excluding special items – of 25 cents, well below the Zacks Consensus Estimate of 31 cents and the year-ago profit of 30 cents.

Revenue of $984.8 million was 46.0% below the year-earlier level but comfortably surpassed the Zacks Consensus Estimate of $634.0 million on the back of strong service sales.

Quarterly Distribution

NuStar announced a quarterly distribution of $1.095 per unit ($4.38 per unit annualized), which remains unchanged from the year-earlier as well as previous-quarter distributions. The distribution is payable on Feb 14 to unitholders of record as on Feb 11, 2013.

Distributable cash flow (DCF) available to limited partners for the fourth quarter was $57.1 million or 73 cents per unit (providing 0.67x distribution coverage), compared with $59.5 million or 90 cents per unit in the year-earlier quarter.

Segmental Performance

Transportation: Quarterly throughput volumes in the Transportation segment were up 4.4% year over year to 923,609 barrels per day. The improvement can be attributed to higher crude oil pipelines throughput that benefited from the completion of two growth capital projects in the Eagle Ford shale during 2012.

The increased throughput, together with higher pipeline tariffs pushed the segment operating income up by 11.4% year over year to $47.9 million. Operating revenue increased 12.3% to $95.5 million.

Storage: Throughput volumes in the Storage segment rose 8.0% year over year to 794,335 barrels per day. However, revenues were essentially flat at approximately $148.5 million on the back of a 4.8% fall in the storage lease revenue (that makes up 81% of the total revenues).

Quarterly operating income reached $33.9 million (down 36.2% year-over-year), pulled down by higher operating expenses.

Asphalt and Fuels Marketing: With the closure the previously announced sale of 50% interest in its asphalt operations to privately held investment firm Lindsay Goldberg LLC during the third quarter. The resulting joint venture has been deconsolidated from NuStar’s financials and therefore the segment results currently reflect only the partnership’s fuels marketing operations. This helped the unit to report a profit of $6.0 million, as against the earlier-year quarter loss of $18.9 million.

Stocks to Consider

NuStar currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at Atlas Pipeline Partners L.P. ( APL - Snapshot Report ) , Enterprise Products Partners L.P. ( EPD - Analyst Report ) and Sunoco Logistics Partners L.P. ( SXL - Analyst Report ) as attractive investments. These oil/gas production pipeline partnerships – all sporting Zacks Rank #2 (Buy) – offers value and are worth accumulating at current levels.