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NuStar (NS) Q2 Earnings Miss But Stock Gains: Here's Why
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The stock of oil pipeline operator NuStar Energy L.P. has gained 3.7% since its second-quarter earnings announcement on Aug 4 as investors chose to look past the earnings miss and focus on the strong performance and growth of its Permian Crude System.
What Did NuStar’s Earnings Unveil?
NuStar Energy reported second-quarter adjusted earnings per unit of 19 cents, below the Zacks Consensus Estimate as well as the year-ago income of 25 cents. The partnership’s bottom line was unfavorably impacted by divestments and weak performance of its “Storage” segment.
However, NuStar Energy reported revenues of $430.2 million that beat the consensus mark of $426 million and edged up 0.7% year over year. This was primarily on account of stronger-than-expected product sales, which rode on all-time high Permian volumes to reach $152.1 million, 11.9% ahead of the Zacks Consensus Estimate.
NuStar recorded an operating income of $109.1 million, down from $115.6 million in the last year’s corresponding quarter. This downside could be blamed on a 19.1% increase in the cost of sales, which drove total expenses higher.
NuStar Energy L.P. Price, Consensus and EPS Surprise
Pipeline: Total quarterly throughput volumes were 1,802,940 barrels per day (Bbl/d), down 2.6% from the year-ago period. Throughput volumes from crude oil pipelines fell 1.9% to 1,220,758 Bbl/d, while throughput from refined product pipelines witnessed a decrease to 582,182 Bbl/d from 606,973 Bbl/d. However, a record-breaking quarter from its Permian Crude System led to a 4% rise in the segment’s revenues to $200.6 million though it could not surpass the consensus mark of $206 million. Operating profit of $101 million was up 4.6% year over year.
Storage: Throughput volumes improved to 396,262 Bbl/d from 385,790 Bbl/d in the prior-year quarter but missed the Zacks Consensus Estimate of 424,369 Bbl/d. The unit’s quarterly revenues fell 25.5% year over year to $88.8 and missed the Zacks Consensus Estimate by 11.6% as storage terminal sales declined 31.2%. Meanwhile, operating income came in at $31.2 million compared with $46.2 million in the corresponding quarter of 2021. The deterioration could be attributed to customer loss, maintenance-related downtime at its St. James facility and the timing of certain settlements.
Fuels Marketing: Product sales increased to $140.8 million from $114.9 million in the year-ago quarter. Notwithstanding a 19.3% uptick in the cost of goods, the segment recorded earnings of $6.6 million, which surged from $2.3 million a year ago, primarily due to higher bunker fuel margins.
Cash Flow, Debt
Second-quarter 2022 distributable cash flow available to limited partners was $83 million (providing 1.88X distribution coverage), lower than $97.4 million (2.22X) in the year-ago period. Despite falling year over year, the 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 Jun 30, the partnership’s long-term debt was $3.1 billion.
Guidance
NuStar remains on track to spend $115-$145 million on capital projects this year ($60 million on the Permian system), while maintenance expenditure is pegged between $35 million and $45 million. The partnership expects Permian Crude System volumes to exit 2022 at an average of 560,000-570,000 barrels per day – well above the record 522,000 achieved during the April-June period and 10% above last year. Net income and adjusted EBITA guidance are expected in the range of $193-$226 million and $700-$750 million, respectively. Further, NuStar continues to target more improvement in its debt-to-EBITDA ratio in the second half, after bringing it down below 4 in the second quarter. Finally, the partnership wants to focus on identified areas of cost control to lessen the effect of inflation and strengthen the free cash flow position.
Zacks Rank & Energy Picks
NuStar currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the Oil/Gas sector are Murphy USA (MUSA - Free Report) , PBF Energy (PBF - Free Report) and Earthstone Energy , each carrying a Zacks Rank #1 (Strong Buy) currently.
Murphy USA: Murphy USA is valued at some $6.7 billion. The Zacks Consensus Estimate for MUSA’s 2022 earnings has been revised 21.9% upward over the past 60 days.
Murphy USA, headquartered in El Dorado, AR, delivered a 40.8% beat in Q2. MUSA shares have surged 82.8% in a year.
Earthstone Energy:ESTE beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 27%, on average.
Earthstone Energy is valued at around $2.1 billion. ESTE has seen its shares gain 74.7% in a year.
PBF Energy: PBF Energy is valued at some $4.1 billion. The Zacks Consensus Estimate for PBF’s 2022 earnings has been revised 118.1% upward over the past 60 days.
PBF Energy, headquartered in Parsippany, NJ, has a trailing four-quarter earnings surprise of roughly 78%, on average. PBF shares have surged 247.5% in a year.
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NuStar (NS) Q2 Earnings Miss But Stock Gains: Here's Why
The stock of oil pipeline operator NuStar Energy L.P. has gained 3.7% since its second-quarter earnings announcement on Aug 4 as investors chose to look past the earnings miss and focus on the strong performance and growth of its Permian Crude System.
What Did NuStar’s Earnings Unveil?
NuStar Energy reported second-quarter adjusted earnings per unit of 19 cents, below the Zacks Consensus Estimate as well as the year-ago income of 25 cents. The partnership’s bottom line was unfavorably impacted by divestments and weak performance of its “Storage” segment.
However, NuStar Energy reported revenues of $430.2 million that beat the consensus mark of $426 million and edged up 0.7% year over year. This was primarily on account of stronger-than-expected product sales, which rode on all-time high Permian volumes to reach $152.1 million, 11.9% ahead of the Zacks Consensus Estimate.
NuStar recorded an operating income of $109.1 million, down from $115.6 million in the last year’s corresponding quarter. This downside could be blamed on a 19.1% increase in the cost of sales, which drove total expenses higher.
NuStar Energy L.P. Price, Consensus and EPS Surprise
NuStar Energy L.P. price-consensus-eps-surprise-chart | NuStar Energy L.P. Quote
Segment Performance
Pipeline: Total quarterly throughput volumes were 1,802,940 barrels per day (Bbl/d), down 2.6% from the year-ago period. Throughput volumes from crude oil pipelines fell 1.9% to 1,220,758 Bbl/d, while throughput from refined product pipelines witnessed a decrease to 582,182 Bbl/d from 606,973 Bbl/d. However, a record-breaking quarter from its Permian Crude System led to a 4% rise in the segment’s revenues to $200.6 million though it could not surpass the consensus mark of $206 million. Operating profit of $101 million was up 4.6% year over year.
Storage: Throughput volumes improved to 396,262 Bbl/d from 385,790 Bbl/d in the prior-year quarter but missed the Zacks Consensus Estimate of 424,369 Bbl/d. The unit’s quarterly revenues fell 25.5% year over year to $88.8 and missed the Zacks Consensus Estimate by 11.6% as storage terminal sales declined 31.2%. Meanwhile, operating income came in at $31.2 million compared with $46.2 million in the corresponding quarter of 2021. The deterioration could be attributed to customer loss, maintenance-related downtime at its St. James facility and the timing of certain settlements.
Fuels Marketing: Product sales increased to $140.8 million from $114.9 million in the year-ago quarter. Notwithstanding a 19.3% uptick in the cost of goods, the segment recorded earnings of $6.6 million, which surged from $2.3 million a year ago, primarily due to higher bunker fuel margins.
Cash Flow, Debt
Second-quarter 2022 distributable cash flow available to limited partners was $83 million (providing 1.88X distribution coverage), lower than $97.4 million (2.22X) in the year-ago period. Despite falling year over year, the 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 Jun 30, the partnership’s long-term debt was $3.1 billion.
Guidance
NuStar remains on track to spend $115-$145 million on capital projects this year ($60 million on the Permian system), while maintenance expenditure is pegged between $35 million and $45 million. The partnership expects Permian Crude System volumes to exit 2022 at an average of 560,000-570,000 barrels per day – well above the record 522,000 achieved during the April-June period and 10% above last year. Net income and adjusted EBITA guidance are expected in the range of $193-$226 million and $700-$750 million, respectively. Further, NuStar continues to target more improvement in its debt-to-EBITDA ratio in the second half, after bringing it down below 4 in the second quarter. Finally, the partnership wants to focus on identified areas of cost control to lessen the effect of inflation and strengthen the free cash flow position.
Zacks Rank & Energy Picks
NuStar currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the Oil/Gas sector are Murphy USA (MUSA - Free Report) , PBF Energy (PBF - Free Report) and Earthstone Energy , each carrying a Zacks Rank #1 (Strong Buy) currently.
Murphy USA: Murphy USA is valued at some $6.7 billion. The Zacks Consensus Estimate for MUSA’s 2022 earnings has been revised 21.9% upward over the past 60 days.
Murphy USA, headquartered in El Dorado, AR, delivered a 40.8% beat in Q2. MUSA shares have surged 82.8% in a year.
Earthstone Energy : ESTE beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 27%, on average.
Earthstone Energy is valued at around $2.1 billion. ESTE has seen its shares gain 74.7% in a year.
PBF Energy: PBF Energy is valued at some $4.1 billion. The Zacks Consensus Estimate for PBF’s 2022 earnings has been revised 118.1% upward over the past 60 days.
PBF Energy, headquartered in Parsippany, NJ, has a trailing four-quarter earnings surprise of roughly 78%, on average. PBF shares have surged 247.5% in a year.