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Why Is Plains All American (PAA) Down 2.3% Since its Last Earnings Report?

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It has been about a month since the last earnings report for Plains All American Pipeline, L.P. (PAA - Free Report) . Shares have lost about 2.3% in that time frame.

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

Plains All American Beats on Q1 Earnings & Revenues

Plains All American Pipeline, L.P. reported first-quarter 2018 adjusted earnings of 36 cents per unit, beating the Zacks Consensus Estimate of 31 cents by 16.13%. Reported earnings increased 33.3% from 27 cents in the year-ago quarter.

In the quarter under review, the partnership reported a GAAP earnings of 33 cents per unit excluding onetime items.

Total Revenues

In the first-quarter, the partnership reported total revenues of $8,398 million, which beat the Zacks Consensus Estimate of $7,435 million by 12.95%.

Quarterly revenues were also up 25.9% from $6,667 million in the year-ago quarter. The top line improved on the back of better performances in Transportation segment as well as Supply and Logistics segment.

Segment Performance

At the Transportation segment, adjusted EBITDA of $335 million increased 23% from the year-ago quarter, courtesy of higher volumes from Permian Basin systems, Eagle Ford JV system and from Diamond pipeline which came into service in 2017. However, the upside was offset by the sale of non-core assets in Rocky Mountain and Central regions.

At the Facilities segment, adjusted EBITDA of $185 million declined 2% from the year-ago quarter. The downside can be attributed to the impact of non-core asset sales.

In the Supply and Logistics segment, adjusted EBITDA of $72 million improved 41% year over year. The improvement was driven by improved NGL and crude oil margin as well as arbitrage opportunities.

Highlights of the Release

In the quarter under review, Plains All American’s total cost and expenses was $8,017 million, up 31.9% year over year from $6,076 million, primarily due to increase in purchases and related costs. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $593 million, up 15.8%.

Interest expenses declined 17.8% to $106 million from a year ago.

The partnership’s operating income declined 35.5% to $381 million from $591 million a year ago.

Financial Update

As of Mar 31, 2018, current assets were $3,962 million compared with $4,000 million as of Dec 31, 2017.

As of Mar 31, 2018, Plains All American had long-term debt of $9,050 million compared with $9,183 million as of Dec 31, 2017. The total long-term debt-to-total book capitalization ratio was 45%, down from 46% at the end of 2017.

Guidance

Plains All American reaffirms full-year 2018 adjusted EBITDA guidance of $2,300 million.

Expected adjusted EBITDA from Transportation segment, Facilities segment, and Supply & Logistics segment are $1,535 million, $665 million, $100 million, respectively.

The partnership expects expansion capital to be $1,400 million, up from $1,135 million invested in 2017.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been four revisions higher for the current quarter compared to two lower. Last month, the consensus estimate has shifted by 7.5% due to these changes.

Plains All American Pipeline, L.P. Price and Consensus

 

VGM Scores

At this time, PAA has a nice Growth Score of B, however its Momentum is doing a bit better with an A. The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 more suitable for momentum investors than those looking for value and growth.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, PAA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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