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NuStar Energy's (NS) Q3 Earnings in Line with Estimates

NS MDR NADL UPLMQ

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San Antonio-based publicly traded partnership, NuStar Energy L.P. (NS - Free Report) reported third-quarter earnings per limited partner unit of 49 cents, in line with the Zacks Consensus Estimate. Robust results from the Refined product pipelines unit was offset by poor results from the Storage and Fuels marketing businesses.

However, the owner and operator of crude oil and refined products pipelines and storage facilities saw its bottom line deteriorate from the year-ago quarter figure of 68 cents. The year-over-year decline can also be attributed to underperformance by the Storage and Fuels marketing businesses.

 

Quarterly revenues of $441 million missed the Zacks Consensus Estimate of $442 million and was also well below the year-ago level of $494 million.

Quarterly Distribution

Last week, NuStar announced a quarterly distribution of $1.095 per unit ($4.38 per unit annualized), flat both sequentially and on an annualized basis. The distribution is payable on Nov 14, to unitholders on record as of Nov 8, 2016.

Per NuStar’s earnings release, distributable cash flow (DCF) available to limited partners for the third quarter was $87.6 million (providing 1.02x distribution coverage) compared with $89.4 million (providing 1.05x distribution coverage).

Segmental Performance

Pipeline: Total quarterly throughput volume in the segment was 920,868 barrels per day (Bbl/d), down 8.7% from the year-ago period. Throughput volumes in the crude oil pipelines plunged 19.5% from the year-ago quarter to 384,359 Bbl/d, whereas refined product pipelines throughput was up 1% to 536,509 Bbl/d.

Throughput revenues declined 6.8% year over year to $122,481 million. The segment’s operating income – $58.9 million – was down from the year-ago figure of $68.5 million, primarily due to decreased throughput volumes from crude oil pipelines.

Storage: Throughput volumes in the Storage segment fell 7.1% year over year to 810,470 Bbl/d. This led to a 2.7% decline in the unit’s quarterly revenues from $162.1 million in the third quarter of 2015 to $157.8 million.

The segment reported operating income of $58.4 million, down 2.7% from $59.9 million earned in the year-ago quarter. Lower throughput terminal revenues were responsible for the downside. 

Fuels Marketing: The unit reported operating loss of $337 million, substantially wider than the year-ago loss of $1.8 million. Results improved due to a 20.4% decline in cost of product sales.

Costs & Expenses

The partnership incurred total costs of $353.5 million, down 10% year over year. Operating expenses came in at $117.4 million, down 4.2% from the corresponding period of last year.

Balance Sheet

As of Sep 30, 2016, the partnership had total debt of $3,160 million, which represents a debt-to-capitalization ratio of 68.3%.

NUSTAR ENERGY Price, Consensus and EPS Surprise

 

Guidance

NuSta  reiterated its 2016 segment guidance for the Pipeline and Storage units but lowered its outlook for the Fuels and Marketing segment. Full-year growth capital budget was decreased to $160–$180 million.

Zacks Rank and Key Stock Picks

Currently, NuStar carries a Zacks Rank #3 (Hold).

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%.

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