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Plains All American (PAA) Down 10.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Plains All American Pipeline (PAA - Free Report) . Shares have lost about 10.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Plains All American due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Plains All American Q2 Earnings Lag Estimates, Slump Y/Y

Plains All American Pipeline, L.P. reported second-quarter 2020 adjusted earnings of 25 cents per unit, which missed the Zacks Consensus Estimate of 28 cents by 10.7%. The bottom line also plunged 62.7% from the year-ago quarter’s figure.

In the quarter under review, the partnership reported GAAP earnings of 13 cents per unit, down 76% from 54 cents earned in the year-ago quarter.

Total Revenues

Total revenues of $3,225 million missed the Zacks Consensus Estimate of $7,029 million by 54.2%. Further, the top line slumped 60.9% from $8,253 million reported a year ago.

Highlights of the Release

In the quarter under review, Plains All American’s total costs and expenses were $3,015 million, down 61.4% year over year. This downside was owing to lower purchases and related costs, field operating costs as well as general and administrative expenses. Consequently, the firm’s operating income dropped to $210 million from $451 million in the prior-year quarter.

Total adjusted EBTIDA (Non-GAAP) for the quarter was $524 million, down 33.2% from the year-ago quarter.

Interest expenses increased 4.9% year over year to $108 million.

Segmental Performance

In the Transportation segment, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $346 million decreased 15.6% from the year-ago quarter’s figure, primarily due tocontracted tariff volumes in multiple regions caused by soft crude oil prices, production shut-ins and tighter regional basis differentials during the quarter.

In the Facilities segment, adjusted EBITDA summed $174 million, up 1.2% from the year-ago quarter’s reported figure. This uptrend was primarily driven by operational cost savings and an expanded capacity at certain Mid-Continent and Gulf Coast crude oil storage terminals.

The Supply and Logistics segment reported adjusted EBITDA of $3 million, which tumbled 98.5% from the year-ago quarter’s figure of $200 million. Thisdowntrend was primarily caused by less favorable crude oil differentials in both Permian Basin and Canada.

Financial Update

As of Jun 30, 2020, current assets were $3,161 million compared with $4,612 million at 2019 end.

As of Jun 30, 2020, Plains All American had long-term debt of $9,393 million compared with $9,187 million on Dec 31, 2019.

As of the same date, its long-term debt-to-total book capitalization was 49%, up from 41% at the end of 2019.

Guidance

Plains All American raised its 2020 earnings expectation to $1.49 per unit, up from its previous estimate of $1.44. The partnership also lifted its 2020 adjusted EBITDA by 3% to $2.5 billion from its prior guidance.

Plains All American trimmed 2020/2021 expansion capital spending projection to $1.45 billion, marking a 6% cut from the prior guided range.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 14.65% due to these changes.

VGM Scores

At this time, Plains All American has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Plains All American has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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