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Magellan Midstream (MMP) Q3 Earnings Top, Revenues Lag

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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.


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 , Ultra Petroleum Corp. 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%.

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