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Magellan Midstream Partners, L.P. recently delivered better-than-expected third-quarter 2020 earnings. However, the stellar results could not boost the stock much so far as there has been no major price gain since the firm’s earnings release on Oct 30.
The partnership reported adjusted earnings per unit of 97 cents, beating the Zacks Consensus Estimate of 85 cents, attributable to reduced expenses and higher commodity profits resulting from an additional sales volume. However, the bottom line fell 18.5% from the year-ago profit of $1.19. Lower refined products demand and a decline in commodity price due to coronavirus-induced disruptions hampered results.
Meanwhile, quarterly revenues of $598 million surpassed the Zacks Consensus Estimate of $565 million. However, the top line decreased from the year-ago sales of $657 million.
Segmental Performance
Refined Products: Revenues of $436.4 million were down from the year-ago period’s $490.8 million. Notably, total volumes shipped in the quarter under review were 119.2 million barrels compared with 136.4 million barrels a year ago. Operating margin from the segment declined to $239 million in the third quarter from $270 million in the corresponding period of 2019. The segment’s depreciation costs and general & administration expenses decreased year over year. Operating profit dropped 12.4% year over year to $169.9 million.
Crude Oil: Quarterly revenues grossed $163.6 million, down 2.2% year over year on the back of lower volumes. Total volumes shipped in the quarter were 45.1 million barrels, down from 79.2 million barrels a year ago. Operating margin contracted to $135.8 million from $156.4 million in the prior year. Operating profit of $96.7 million declined 23.6% year over year due to depressed volumes and margins.
DCF & Balance Sheet
Magellan Midstream’s distributable cash flow (DCF) for the third quarter summed $258.8 million, dropping 15.6% from the year-ago level.
Notably, on Oct 22, the partnership announced third-quarter cash distribution of $1.0275 per unit ($4.11 on an annualized basis), representing 1% annual growth. The amount is payable Nov 13 to its unitholders of record as of Nov 6.
As of Sep 30, 2020, the firm had cash and cash equivalents worth $8.5 million, and a long-term debt of $4.90 billion.
2020 Outlook
As the economy is on the mend from the coronavirus-caused oil price crash, management expects to generate distributable cash flows in the $1,000-$1,050 million range for the full year and plans to retain the current level of cash distribution for the rest of the year. Magellan Midstream projected fourth-quarter 2020 earnings per unit of 80 cents while the same for the full year is anticipated to be $3.60.
The firm plans to spend $400 million in the ongoing year and $40 million in 2021 on completing certain expansion projects.
Zacks Rank & Key Picks
Magellan Midstream currently has a Zacks Rank #4 (Sell).
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Magellan Midstream (MMP) Hardly Rises Despite Q3 Earnings Beat
Magellan Midstream Partners, L.P. recently delivered better-than-expected third-quarter 2020 earnings. However, the stellar results could not boost the stock much so far as there has been no major price gain since the firm’s earnings release on Oct 30.
The partnership reported adjusted earnings per unit of 97 cents, beating the Zacks Consensus Estimate of 85 cents, attributable to reduced expenses and higher commodity profits resulting from an additional sales volume. However, the bottom line fell 18.5% from the year-ago profit of $1.19. Lower refined products demand and a decline in commodity price due to coronavirus-induced disruptions hampered results.
Meanwhile, quarterly revenues of $598 million surpassed the Zacks Consensus Estimate of $565 million. However, the top line decreased from the year-ago sales of $657 million.
Segmental Performance
Refined Products: Revenues of $436.4 million were down from the year-ago period’s $490.8 million. Notably, total volumes shipped in the quarter under review were 119.2 million barrels compared with 136.4 million barrels a year ago. Operating margin from the segment declined to $239 million in the third quarter from $270 million in the corresponding period of 2019. The segment’s depreciation costs and general & administration expenses decreased year over year. Operating profit dropped 12.4% year over year to $169.9 million.
Crude Oil: Quarterly revenues grossed $163.6 million, down 2.2% year over year on the back of lower volumes. Total volumes shipped in the quarter were 45.1 million barrels, down from 79.2 million barrels a year ago. Operating margin contracted to $135.8 million from $156.4 million in the prior year. Operating profit of $96.7 million declined 23.6% year over year due to depressed volumes and margins.
DCF & Balance Sheet
Magellan Midstream’s distributable cash flow (DCF) for the third quarter summed $258.8 million, dropping 15.6% from the year-ago level.
Notably, on Oct 22, the partnership announced third-quarter cash distribution of $1.0275 per unit ($4.11 on an annualized basis), representing 1% annual growth. The amount is payable Nov 13 to its unitholders of record as of Nov 6.
As of Sep 30, 2020, the firm had cash and cash equivalents worth $8.5 million, and a long-term debt of $4.90 billion.
2020 Outlook
As the economy is on the mend from the coronavirus-caused oil price crash, management expects to generate distributable cash flows in the $1,000-$1,050 million range for the full year and plans to retain the current level of cash distribution for the rest of the year. Magellan Midstream projected fourth-quarter 2020 earnings per unit of 80 cents while the same for the full year is anticipated to be $3.60.
The firm plans to spend $400 million in the ongoing year and $40 million in 2021 on completing certain expansion projects.
Zacks Rank & Key Picks
Magellan Midstream currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the energy space are Oasis Petroleum Inc , Antero Resources Corporation (AR - Free Report) and Matador Resources Company (MTDR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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