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NuStar Energy (NS) Surges 30% Despite Missing on Q3 Earnings

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NuStar Energy L.P. (NS - Free Report) stock has jumped around 30% since third-quarter 2020 earnings performance was reported on Nov 5. Despite this industry player’s disappointing quarterly earnings, investors were encouraged by its increased adjusted EBITDA midpoint guidance for 2020.

Oil pipeline operator NuStar Energy reported third-quarter adjusted earnings per unit of 8 cents, below the Zacks Consensus Estimate of 17 cents. The partnership’s bottom line also fell from the year-ago earnings of 15 cents per unit. Quarterly performance was impacted by lower-than-anticipated revenues from the Fuels Marketing segment. Notably, the firm’s Fuels Marketing unit reported revenues of $64 million, missing the Zacks Consensus Estimate of $71 million.

However, NuStar Energy reported total quarterly revenues of $363 million, beating the Zacks Consensus Estimate of $361 million, attributable to better-than-expected revenues from the Storage unit. Precisely, the partnership’s Storage unit generated revenues of $122.4 million, surpassing the Zacks Consensus Estimate of $120 million. The top line, however, declined 4% year over year.

Also, the company recorded an operating income of $105 million, higher than the profit of $100 million in the corresponding quarter of last year.

Segmental Performance

Pipeline: Total quarterly throughput volumes were 1,751,471 barrels per day (Bbl/d), down 1.2% from the year-ago period. Throughput volumes from crude oil pipelines increased 1.3% from the year-earlier quarter to 1,235,176 Bbl/d while throughput from refined product pipelines witnessed a decrease to 516,295 Bbl/d from 554,276 Bbl/d. As a result, the segment’s revenues dipped 1.7% year over year to $176.2 million. Moreover, the firm’s Pipeline unit reported an operating income of $83.8 million compared with the operating income of $87.8 million in the year-ago period.

Storage: Throughput volumes climbed to 466,229 Bbl/d from 438,999 Bbl/d in the prior-year quarter. Moreover, the unit’s quarterly revenues increased to $122.4 million from $113.7 a year ago owing to surging throughput terminal revenues (from $26.3 million to $29.3 million). Evidently, the segment’s operating income summed $48.8 million in the September quarter compared with $37.9 million in the comparable period last year.

Fuels Marketing: Product sales decreased to $63.9 million from $85.1 million in the year-ago quarter. On a positive note, cost of goods dropped 21.1% from the prior-year period to $63.2 million. However, NuStar Energy delivered weak margins from its bunkering business. The segment recorded a loss of $31 thousand in the quarter under review against the profit of $4.3 million in third-quarter 2019.

NuStar Energy L.P. Price, Consensus and EPS Surprise

NuStar Energy L.P. Price, Consensus and EPS Surprise

NuStar Energy L.P. price-consensus-eps-surprise-chart | NuStar Energy L.P. Quote

Cash Flow, Debt and Guidance

Third-quarter 2020 adjusted distributable cash flow available to limited partners was $83.9 million, lower than $87.8 million in the year-ago period. However, adjusted distribution coverage improved to 1.92X from 1.36X in the third 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 Sep 30, the partnership’s total consolidated debt was $3.6 billion.

Taking into account the resilience of the company’s business and the recovery from coronavirus-induced demand woes for the fuel, NuStar Energy raised its current-year adjusted EBITDA midpoint guidance by $10 million and narrowed the range to $690-730 million.

Zacks Rank & Key Picks

NuStar Energy has a Zacks Rank #3 (Hold), currently. Some better-ranked players 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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