A month has gone by since the last earnings report for DCP Midstream Partners, LP . Shares have added about 8.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is DCP Midstream Partners, LP due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
DCP Midstream Misses Q1 Earnings Estimates, Revenues Beat
DCP Midstream reported first-quarter 2021 adjusted earnings of 19 cents per unit, missing the Zacks Consensus Estimate of 30 cents. In the year-earlier quarter, the midstream energy player incurred a loss of $2.71 per unit.
Revenues of $2,318 million beat the Zacks Consensus Estimate of $2,003 million. Moreover, the figure increased from $1,657 million in the year-ago quarter.
The partnership’s lower-than-expected quarterly earnings were caused by higher operating costs and expenses along with lower NGL pipelines volumes. The negatives were partially offset by higher natural gas storage and a favorable commodity environment.
Logistics and Marketing
The segment recorded operating income of $146 million for the first quarter, down from the year-ago period’s $236 million. Lower NGL pipelines throughput volumes, caused by the winter storm Uri, affected the segment. The negatives were partially offset by higher natural gas storage.
Average NGL pipelines throughput for the quarter was 578 thousand barrels per day (Mbpd), lower than the year-ago level of 677 Mbpd. Fractionator throughput, moreover, decreased to 43 Mbpd from the year-ago level of 58 Mbpd.
Gathering and Processing
The segment reported net income of $27 million for the first quarter against a loss of $645 million a year ago. Decreased operating costs boosted the segment, partially offset by a decline in volumes.
Average wellhead volumes for the quarter declined to 4,077 million cubic feet per day (MMcf/d) from the year-ago period’s 4,940 MMcf/d. Moreover, NGL gross production decreased to 361 Mbpd from 404 Mbpd in the year-ago quarter.
Purchases and related costs significantly increased year over year for the quarter under review. This was partially offset by decreased general and administrative expenses as well as operating and maintenance costs.
Total operating costs and expenses for the first quarter were $2,315 million, up from the year-ago figure of $2,203 million.
For first-quarter 2021, total expansion capital expenditure and equity investments were $4 million. Sustaining capital for the quarter was $10 million. It generated excess free cash flow of $89 million in the first quarter.
At the end of first-quarter 2021, the partnership reported long-term debt of $5,178 million, up from $5,119 million at fourth quarter-end. Cash and cash equivalents declined to $5 million from $52 million at fourth quarter-end. Moreover, it had current debt of $504 million.
The partnership kept its 2021 financial guidance unchanged.
Throughout 2021, it is expected to maintain stable distribution at $1.56 per unit on an annualized basis. Due to the coronavirus pandemic, DCP Midstream is expected to take a conservative approach through 2021 in regard to volumes and pricing of commodities. The partnership expects adjusted EBITDA for 2021 in the range of $1,120-$1,260 million, the midpoint of which is below the 2020 level of $1,252 million. It expects excess free cash flow to rise more than 60% in 2021 to $310-$460 million from the 2020 level of $237 million.
DCP Midstream expects expansion capital expenditures and equity investments within $25-$75 million in 2021, indicating a significant decline from $205 million in 2020. Sustaining capital expenditures for 2021 are estimated within $45-$85 million. The metric was $45 million in 2020.
NGL pipeline volumes are expected to rise this year supported by higher ethane recovery. However, overall profits might get affected by decreasing Guadalupe earnings. Also, Gathering and Processing volumes are expected to decline in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 5.53% due to these changes.
At this time, DCP Midstream Partners, LP has an average Growth Score of C, 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 20% 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, DCP Midstream Partners, LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.