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We expect pipeline operator, Magellan Midstream Partners LP (MMP - Analyst Report), to beat expectations when the company reports its first-quarter 2013 results before the opening bell on May 2, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Magellan is likely to beat earnings because it has the right combination of two 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 of 52 cents and the Zacks Consensus Estimate of 50 cents, stands at +4.00%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

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

The combination of Magellan’s Zacks Rank #2 (Buy) and +4.00% ESP makes us very confident of a positive earnings beat on May 2, 2013.

What is Driving the Better-Than-Expected Earnings?

Magellan owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee and tariff-based revenues. This includes the longest refined petroleum products pipeline system and access to more than 40% of the refining capacity in the U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage capacity.

Moreover, Magellan’s investment grade credit ratings provide a competitive advantage in accessing capital at reasonable cost.

Finally, we remain upbeat regarding Magellan’s acquisition of petroleum storage and pipelines from a subsidiary of BP plc (BP - Analyst Report). Following the acquisition, Magellan owns one of the largest crude oil storages in the Cushing crude oil region and will continue to exploit opportunities to improve utilization of these assets.

Other Stocks to Consider

Here are some other energy firms that are worth considering as these have the right combination to report an earnings beat this quarter:

SemGroup Corporation(SEMG - Snapshot Report) has an earnings ESP of +28.95% and a Zacks Rank #1 (Strong Buy).

Exterran Partners LP(EXLP - Snapshot Report) has an earnings ESP of +4.35% and a Zacks Rank #2 (Buy).

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