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Why Is Crestwood Equity Partners LP (CEQP) Up 6.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Crestwood Equity Partners LP (CEQP - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Crestwood Equity 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 drivers.

Crestwood Q3 Earnings Miss Estimates

Crestwood Equity Partners incurred third-quarter 2021 adjusted loss per unit of 29 cents versus the Zacks Consensus Estimate of earnings of 17 cents. The bottom line also deteriorated from the year-ago adjusted loss of 28 cents per unit.

Total revenues surged to $1,226.3 million from $519.2 million in the prior-year quarter. Also, the top line beat the consensus mark of $945 million.

The weak third-quarter earnings were caused by decreased contribution from storage and transportation as well as marketing, supply, and logistics businesses. Also, increased operating expenses played a spoilsport. The negatives were partially offset by higher gas gathering and processing.

Segmental Performance

Gathering and Processing: The segment generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $112.9 million, up from $88.9 million in the year-ago quarter. Operating and maintenance expenses marginally decreased to $19.5 million from the year-ago level of $19.4 million.

Total gas gathering volumes for the quarter were 975.2 million cubic feet per day (MMcf/d), up from 867.8 MMcf/d a year ago. Gathering volumes declined in Marcellus, while rose in Delaware, Bakken - Arrow, Barnett and Powder River Basin. Total processing volumes increased to 409.4 MMcf/d from the year-ago level of 328.2 MMcf/d. Yet, compression volumes declined to 253.6 MMcf/d from 358.4 MMcf/d in the year-ago period.

Storage and Transportation: The unit generated EBITDA of $3.7 million, down from $14.7 million in the year-ago quarter, primarily due to the Stagecoach divestment. Operating and maintenance expenses increased to $1.5 million from the year-ago level of $0.7 million.

Firm storage services in the Gulf Coast storage declined to 225.7 MMcf/d from 285.4 MMcf/d in the prior-year quarter. Rail loading at the COLT hub decreased to 40.7 thousand barrels per day (MBbls/d) from 42.4 MBbls/d a year ago.

Marketing, Supply and Logistics: It incurred a loss of $34.8 million against a $14.9 million profit in the year-ago quarter, primarily due to limited storage opportunities for butane and market backwardation. Operating and maintenance expenses marginally decreased to $10.6 million from the year-ago level of $10.9 million.

NGL volumes sold or processed in the third quarter came in at 151.2 MBbls/d, up from 78.5 MBbls/d in the year-ago period.

Expenses

Total operating expenses and others increased to $140.6 million from $132.7 million in the year-ago period.

Operation and maintenance costs marginally increased to $31.6 million from $31 million a year ago. General and administrative expenses also increased to $25.9 million for the September quarter from $19.6 million in third-quarter 2020.

Cash Flow

Distributable cash flow for the third quarter was recorded at $85.8 million, down from $86.5 million in the year-ago period.

Free cash flow after distributions was recorded at $17.5 million for the September quarter, down from $29.6 million in the year-ago period.

Balance Sheet

As of Sep 30, 2021, the partnership had $14.3 million in cash, down from $16.6 million at second quarter-end. Total debt of $2,025.1 million at third quarter-end decreased from $2,621.8 million at second quarter-end. The partnership had a long-term debt to capitalization of 62%.

Views

Crestwood reiterated its 2021 adjusted EBITDA expectation at the $570-$600 million range. It expects to meet or surpass the upper limit of the range. The partnership reiterated estimates for free cash flow after paying distributions at the $150-$180 million band.

Furthermore, it expects capital spending related to growth projects of $35-$45 million. Maintenance capital is expected within $20-$25 million. Crestwood anticipates volumes from Bakken, Powder River Basin, Delaware and Barnett to increase in the coming days.

In the third quarter, the firm received new long-term deals from Continental Resources for Powder River and Delaware basins’ assets.

On Oct 26, it agreed to acquire Oasis Midstream Partners LP, the midstream unit of Oasis Petroleum, for $1.8 billion. The move is expected to boost Crestwood’s footprint in major U.S. shales, primarily in Williston and Delaware Basins. The deal is expected to close in first-quarter 2022. The move is expected to add incremental annual cash flow of $20 million to Crestwood’s portfolio over the next few years. Also, the combined entity will likely save $25 million in annual cost synergies. Investors should note that the partnership expects the deal to enable it to boost distribution by 5% year over year to $2.62 per unit per annum.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

The consensus estimate has shifted 56.59% due to these changes.

VGM Scores

At this time, Crestwood Equity Partners LP has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Crestwood Equity Partners LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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