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Enterprise Products (EPD) Up 3.3% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Enterprise Products Partners L.P. (EPD - Free Report) . Shares have added about 3.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is EPD due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Enterprise Products’ first-quarter 2018 adjusted earnings per limited partner unit of 39 cents beat the Zacks Consensus Estimate of 38 cents. The bottom line improved from earnings of 36 cents in the year-ago quarter.

Quarterly distribution at Enterprise Products improved 3% year over year to 42.75 cents per common unit, or $1.71 per unit on an annualized basis. Adjusted distributable cash flow was at a record level of $1.4 billion, up 27% from the prior-year quarter and provided coverage of 1.5x. The partnership retained $458 million of cash flow, thereby reducing the need to issue more equity for capital growth projects.

Revenues in the quarter jumped to $9,298.5 million from $7,320.4 million in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $7,832 million.

Higher contribution from three of the partnership’s four segments fueled the growth.

Q1 Segmental Performance

Gross operating income in the NGL Pipeline & Services segment increased to $885 million from $856 million in the year-ago quarter, beating the Zacks Consensus Estimate of $855 million. The upside can be attributed to overall volume increase (except fee-based natural gas processing), and NGL pipelines and storage business, in which operating margin increased $54 million.

Natural Gas Pipeline and Services’ gross operating income increased to $198 million, reflecting a year-over-year change of 16%, beating the Zacks Consensus Estimate of $176 million. The upside was driven by increased firm capacity in the Texas Interstate system and higher treating revenues, as well as firm gathering volumes in Haynesville gathering system.

Gross operating income from the Crude Oil Pipelines & Services segment was $220 million compared with $265 million in the prior-year quarter, lagging the Zacks Consensus Estimate of $289 million. The decrease was mainly due to Midland-to-ECHO pipeline system’s $60 million loss in the quarter and $46 million decline in gross operating margin from other marketing activities.

Petrochemical & Refined Product Services segment reported gross operating income of $272 million, reflecting a rise of 50% year over year. It also beat the Zacks Consensus Estimate of $198 million. The positives can be attributed to higher sales margins at the partnership’s Mont Belvieu propylene fractionators, butane isomerization and related operations, and octane enhancement and high-purity isobutylene business.

Financials

During the quarter, the partnership’s capital investments were $1.1 billion. Outstanding total debt principal as of Mar 31, 2017 was $25.6 billion. The partnership had consolidated liquidity of $5 billion by the quarter-end, including unrestricted cash on hand and available borrowing capacity.

Guidance

For 2018, the partnership estimates growth capital spending of $3.2-$3.4 billion and $315 million for sustaining capital expenditures.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.

VGM Scores

At this time, EPD has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and to a lesser degree value.

Outlook

EPD has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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