Back to top

Analyst Blog

Pipeline operator Magellan Midstream Partners LP (MMP - Free Report) delivered strong earnings in third-quarter 2016. The Tulsa, OK-based oil distributor earnings per unit (EPU) – excluding mark-to-market commodity-related pricing adjustments – of 91 cents, beat the Zacks Consensus Estimate of 88 cents. Also, the bottom line surpassed the year-ago earnings of 86 cents. The outperformance came on the back of higher contributions from Magellan's core fee-based transportation and terminal activities.

 

Total revenue of $552 million decreased 4.3% year over year. The top line also missed the Zacks Consensus Estimate of $555 million.       

Distributable Cash Flow

Magellan Midstream’s distributable cash flow for the third quarter was $243.9 million, up 6% from the year-ago quarter.  

Cash Distribution

On Oct 20, 2016, Magellan Midstream announced that its board of directors approved an increase in third-quarter cash distribution. The new distribution of 83.75 cents per unit represents a sequential hike of 2% and a year-over-year improvement of 10%.     

Segmental Performance

Refined Products: Quarterly operating profits were approximately $183.6 million, down almost 24% from the year-ago quarter. The decline stemmed from ineffective hedging of the partnership's commodity-related activities.

Crude Oil: Operating margin was approximately $98.7 million, up 4.2% from the prior-year quarter.

Marine Storage: Operating margin was $33.2 million, up 3.1% from the year-ago quarter. Higher average rates from contract renewals and escalations in the current period led to the outperformance.

Guidance

The partnership reiterated its annual distribution growth of 10% for 2016. Also, Magellan Midstream continues to project at least 8% annual distribution growth for 2017. Distributable cash flows projection for this year was increased to $925 million by the partnership.   

MAGELLAN MDSTRM Price, Consensus and EPS Surprise

 

Magellan Midstream guided fourth-quarter and full-year 2016 earnings per unit of 91 cents and $3.50, respectively.  
 

Zacks Rank & Other Stocks

Magellan Midstream currently carries a Zacks Rank #3 (Hold), implying that the partnership will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector include North Atlantic Drilling Limited (NADL - Free Report) , Ultra Petroleum Corp. (UPLMQ - Free Report) and McDermott International Inc. (MDR - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, North Atlantic Drilling posted an average positive earnings surprise of 148.4%.

Ultra Petroleum, on the other hand, posted an average positive earnings surprise of 65.91% in the last four quarters.

In the last four quarters, McDermott posted an average positive earnings surprise of 250.00%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>