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Magellan Midstream (MMP) Q1 Earnings and Sales Top Estimates

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Magellan Midstream Partners, L.P. (MMP - Free Report) stock has been stable since the company’s first-quarter 2021 earnings announcement on Apr 29.Despite this industry player’s impressive earnings and revenue results, and a solid Distributable Cash Flow (DCF) guidance for 2021, the partnership’s units failed to display significant growth.

Behind the Earnings Headlines

Magellan Midstream reported first-quarter 2021 adjusted earnings per unit of $1.09, beating the Zacks Consensus Estimate of 87 cents. The better-than-anticipated earnings are attributable to reduced expenses and healthy production margins owing to a more favorable pricing environment.

However, the bottom line fell 14.8% from the year-ago profit of $1.28 due to weak crude oil transportation and terminal revenues induced by lower average tariff rates and less volume shipped.

Meanwhile, quarterly revenues of $661 million outpaced the Zacks Consensus Estimate of $653 million but the top line lagged the year-ago sales of $783 million.

Segmental Performance  

Refined Products:  Revenues of $513.75 million were down from the year-ago period’s $628.9 million.Notably, total volumes shipped in the quarter under review were 118.1 million barrels, comparing unfavorably with 119.8 million barrels a year ago and the Zacks Consensus Estimate of 128 million barrels. The numbers reflect the lingering effects of coronavirus and inclement weather events. Operating margin from the segment declined to $273.6 million in the first quarter from $305.8 million in the corresponding period of 2020. However, it came above the Zacks Consensus Estimate of $245 million on cost efficiencies.     

Crude Oil:  Quarterly revenues grossed $149.1 million, down 4.1% year over year due to lower volumes shipped and softness in average tariff rates. Total volumes shipped in the quarter were 46.5 million barrels, down from 75.1 million barrels a year ago and also lower than the Zacks Consensus Estimate of 61 million. Operating margin contracted to $109 million from $119.9 million in the prior year and also fell below the Zacks Consensus Estimate of $117 million.

DCF & Balance Sheet

Magellan Midstream’s distributable cash flow (DCF) for the first quarter summed $276.5 million, dropping 9.8% from the year-ago level.

Notably, on Apr 22, the firm announced first-quarter cash distribution of $1.0275 per unit ($4.11 on an annualized basis). The amount is payable May 14 to its unitholders of record as of May 7.

As of Mar 31, 2020, the firm had cash and cash equivalents worth $13.03 million, and a long-term debt of $5 billion.

Magellan Midstream presently has $473 million under its $750-million repurchase program, which is set to expire in 2022.

2021 Outlook

As a result of the partnership's strong financial results for the first quarter and a more favorable product pricing climate for its gas liquids blending operations, management raised its annual DCF outlook by $50 million to $1.07 billion.

For the full year, free cash flow (FCF) is expected to be $1.27 billion or $350 million after distributions, which contains proceeds from the recent sale of a partial stake in the Pasadena marine terminal joint venture.

Based on the success of projects currently underway, Magellan Midstream plans to invest $75 million in 2021 and $15 million in 2022 to complete its current slate of expansion capital projects.

Zacks Rank & Key Picks

Magellan Midstream currently has a Zacks Rank #3 (Hold). Some better-ranked players in the  energy  space are Whiting Petroleum Corporation (WLL - Free Report) , Matador Resources Company (MTDR - Free Report) and Continental Resources, Inc. (CLR - Free Report) , each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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