PAA Likely to Beat 4Q

Plains All American Pipeline, L.P. (PAA - Analyst Report) will report fourth-quarter 2012 results on Feb 6, 2013. The partnership is involved in transportation, storage and marketing of crude oil, refined products and liquefied petroleum gas, and other natural gas-related petroleum products.

Why a Likely Positive Surprise?

Our proven model shows that Plains All American Pipeline is likely to beat earnings because it has the right combination of key factors.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +1.45%. This is meaningful and a leading indicator of a likely positive earnings surprise for this master limited partnership.

Zacks #3 Rank (Hold): We note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Plains All American Pipeline’s Zacks Rank #3 (Hold) and +1.45% ESP makes us confident of a positive earnings beat this announcement.

What is Driving the Better than Expected Earnings?

We appreciate Plains All American Pipeline’s diversified portfolio of crude oil pipelines and storage assets. These are located in well-established oil producing regions and serve major U.S. refineries and distribution markets.

The partnership intends to invest more than $1 billion in several organic growth projects through 2013. This will subsequently strengthen and expand its existing operations as well as improve its financial performance.

Plains All American Pipeline’s fourth-quarter 2012 financial results will improve on favorable crude oil differentials and growing natural gas liquids sales volumes.

The positive trend is seen in the trailing four quarter average surprise of 16.60%. The partnership’s third-quarter 2012 surprise was 51.06%. Benefits from acquisitions, higher pipeline tariffs and volumes, and completion of several organic growth projects aided the surprise.

Other Stocks to Consider

Plains All American Pipeline is not the only organization looking up this earnings season. We also see other pipeline operators to beat earnings.

Sunoco Logistics Partners L.P. (SXL - Analyst Report), earnings ESP of +7.69% and Zacks Rank #2 (Buy).

Buckeye Partners, L.P. (BPL - Analyst Report), earnings ESP of +4.94% and Zacks Rank #3 (Hold).

Boardwalk Pipeline Partners, LP (BWP - Snapshot Report), earnings ESP of +5.13% and Zacks Rank #3 (Hold).