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Why is Energy Transfer Partners (ETP) Up 5.4% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Energy Transfer Partners, L.P. (ETP - Free Report) . Shares have added about 5.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ETP 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

Energy Transfer Partners delivered first-quarter 2018 earnings of 24 cents per limited partner unit, missing the Zacks Consensus Estimate of 26 cents. The weaker-than-expected results can be attributed to increased costs and the lower-than-anticipated performance from its Midstream segment. The Midstream segment reported EBITDA of $377 million, as against the Zacks Consensus Estimate of $390 million.  

However, the bottom line improved significantly from the year-ago income of 3 cents in the first quarter of 2017, primarily on strong contribution from the Crude Oil and NGL Transportation and Services segments.

Quarterly revenues increased to $8,280 million from $6,895 million a year ago. However, the top line lagged the Zacks Consensus Estimate of $8,499 million.

Quarterly Cash Distribution

Last month, Energy Transfer Partners announced first-quarter distribution of about 57 cents per unit ($2.26 per unit annualized), unchanged from the fourth quarter. This quarterly distribution will be paid tomorrow to its unit holders of record as of May 7, 2018.

EBITDA, Operating Income and Net Income

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter were $1,881 million compared with $1,445 million a year ago. The improvement of 30.2% can be attributed to strong performance from the Crude Oil Transportation and Services segment that delivered EBITDA of $464 million, surging a whopping 148.1% from the year-ago quarter. The company’s Crude Oil Transportation and Services segment benefited from the Bakken Pipeline project (which entered into service in the second quarter of 2017) along with strong crude oil throughput volumes.

Further, the NGL Transportation and Services segment reported EBITDA of $451 million in the quarter under review compared with $381 million in the prior-year quarter. Increased NGL transportation and fractionation volumes drove the results of the above-mentioned segment. However, the results were partly offset by lower refined products terminal volumes.

The Midstream segment generated EBITDA of $377 million, surging 17.8% from first-quarter 2017. The segment benefited from higher production volumes in the Permian, South Texas and North East regions. Higher non-fee-based processing margins and increased fee-based revenues also bolstered the results compared with the prior-year quarter.

The Interstate Transportation/Storage segment also reported higher EBITDA of $323 million compared with $265 million recorded a year ago on higher volumes of natural gas transported. Likewise, the results from the Intrastate Transportation/Storage segment were also stronger, with adjusted EBITDA of $192 million compared with $159 million in the year-ago quarter.  However, EBITDA from all other segments decreased to $74 million compared with $123 million in the year-ago quarter.

The partnership reported operating income of $973 million compared with an income of $683 million in first-quarter 2017 on the back of higher revenues, despite increasing costs.

Notably, the partnership reported total expense of $7,307 million in first-quarter 2018, reflecting an increase of 17.6% from the prior-year quarter. The higher expenses can primarily be attributed to the increased cost of products sold, along with higher operating and depreciation costs.

Energy Transfer Partners reported a net income of $879 million in the reported quarter, skyrocketing 123.6% from the net income of $393 million in the year-ago quarter.

Distributable Cash Flow

Distributable cash flow of $1,366 million was higher than the prior-year quarter level of $972 million, reflecting a hike of 40.5%. However, the partnership’s distribution coverage declined to $1.15x compared with 1.17x in the year-ago quarter.

Balance Sheet

As of Mar 31, 2018, Energy Transfer Partners had long-term debt (less current maturities) of $33,109 million. The debt-to-capitalization ratio was about 49.3%

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to three lower.

VGM Scores

At this time, ETP has a strong Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was also allocated a grade of A on the value side, putting it in the top quintile 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.

Zacks style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

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




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