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NuStar Energy L.P. (NS) Down 13.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for NuStar Energy L.P. (NS - Free Report) . Shares have lost about 13.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NuStar Energy L.P. 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 drivers.

NuStar Energy’s Q2 Earnings and Revenues Miss Estimates

Oil pipeline operator NuStar Energy reported second-quarter adjusted earnings per unit of 6 cents, below the Zacks Consensus Estimate of 16 cents. The partnership’s bottom line also fell from the year-ago earnings of 10 cents. Quarterly performance was impacted by lower-than-anticipated operating income from the pipeline segment. Notably, the partnership’s Pipeline unit reported an operating income of $72 million, missing the Zacks Consensus Estimate of $84 million.

Moreover, NuStar Energy reported revenues of $339.5 million, lagging the Zacks Consensus Estimate of $351 million and also declining 8.6% year over year.

Also, the company recorded an operating income of $92.7 million, marginally lower than the profit of $93.2 million in the corresponding quarter of last year.

Segmental Performance

Pipeline: Total quarterly throughput volumes were 1,516,417 barrels per day (Bbl/d), down 8.6% from the year-ago period. Throughput volumes from crude oil pipelines fell 2.4% from the year-ago quarter to 1,063,739Bbl/d while throughput from refined product pipelines witnessed a decrease to 452,678Bbl/d from 569,820Bbl/d. Precisely, the volume slump at NuStar Energy’s Permian crude system contracted pipeline throughputs.  As a result, the segment’s revenues dipped 3.7% year over year to $166.1 million. Moreover, the firm’s Pipeline unit reported an operating income of $72 million compared with the operating income of $78.7 million in the year-ago period.

Storage: Throughput volumes plummeted to 348,189Bbl/d from 395,512Bbl/d in the prior-year quarter. However, the unit’s quarterly revenues increased to $119.4 million from $110.4 a year ago owing to surging throughput terminal revenues (from $23.2 million to $32.2 million). Further, NuStar Energy’s Storage segment benefited from a full-quarter contribution from the new Taft 30-inch pipeline and other expansion projects. Evidently, the segment’s operating income summed $43.2 million in the June quarter compared with $38.1 million in the comparable period last year.

Fuels Marketing: Product sales decreased to $54 million from $89.5 million in the year-ago quarter. On a positive note, cost of goods dropped 41.6% from the prior-year period to $50.1 million. Moreover, NuStar Energy delivered strong margins from its bunkering business. The segment recorded earnings of $3.3 million in the quarter under review compared with $3.2 million in second-quarter 2019.

Cash Flow, Debt and Guidance

Second-quarter 2020 distributable cash flow available to limited partners was $62.5 million, lower than $82.9 million in the year-ago period. However, distribution coverage improved to 1.43X from 1.28X in the second quarter of 2019. A coverage ratio far in excess of 1 implies that the partnership is generating more than enough cash in the period to cover its distribution.

As of Jun 30, the partnership’s total consolidated debt was $3.4 billion.

Taking into account the impact of the historic oil market crash and the coronavirus-induced demand woes for the fuel, NuStar Energy reiterates its 2020 adjusted EBITDA guidance in the band of $665-735 million. This is around 6% lower at the midpoint than its projection provided before the coronavirus pandemic.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -21.25% due to these changes.

VGM Scores

At this time, NuStar Energy L.P. has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NuStar Energy L.P. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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