A month has gone by since the last earnings report for Enterprise Products Partners (EPD - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Enterprise Products 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 catalysts.
Enterprise Products Q2 Earnings Beat Estimates, Improve Y/Y
Enterprise Products reported second-quarter 2018 adjusted earnings per limited partner unit of 46 cents, which beat the Zacks Consensus Estimate of 39 cents. The bottom line also improved from the year-ago quarter’s earnings of 30 cents.
Quarterly revenues totaled $8,468 million, up from $6,608 million in the year-ago quarter.
The year-over-year upside can be attributed to increase in volumes from the three segments of the master limited partnership — NGL Pipeline & Services, Natural Gas Pipeline and Services and Petrochemical & Refined Product Services. However, these were partially offset by increased costs and expenses.
Quarterly distribution at Enterprise Products Partners increased 2.4% year over year to 43 cents per common unit. Adjusted distributable cash flow of $1.4billion provided coverage of 1.5x. The partnership retained $491 million in cash flow, gaining the financial flexibility to fund growth capital projects, reduce debt and lower the possibility of issuing additional equity. The partnership managed to generate strong levels of cash flows and rewarded unitholders with growing distribution amid tough business environment.
Q2 Segmental Performance
The operating income from the different segments increased except Crude Oil Pipelines & Services segment primarily due to increased volumes.
Gross operating income in the NGL Pipeline & Services segment rose to a record $914 million from $760 million in the year-ago quarter. The upside can be attributed to contractual increases in committed volumes. The figure also beat the Zacks Consensus Estimate of $821 million. Improved contribution from Mont Belvieu NGL and associated product storage business supported growth in the segment.
Natural Gas Pipeline and Servicessegment recorded gross operating income of $213 million compared with $194 million in the prior-year quarter. Also, the figure beat the Zacks Consensus Estimate of $180 million as the gathering system in the Permian Basin transported more volumes compared with the prior-year quarter’s levels. The upside was driven by increased firm capacity in the Texas Interstate system and higher treating revenues along with firm gathering volumes in Haynesville gathering system.
Gross operating income from the Crude Oil Pipelines & Services segment declined 77.6% year over year to $53 million and lagged the Zacks Consensus Estimate of $296 million. The decline was mainly caused by the Midland-to-ECHO pipeline system and from other marketing activities that led to a $211-million loss in the quarter.
Gross operating income in the Petrochemical & Refined Product Services segment grew to $282 million from the year-ago quarter’s level of $188 million and also beat the Zacks Consensus Estimate of $255 million, owing to increase in the gross operating margin in the propylene business.
Cost and Expenses
During the second quarter of 2018, the partnership’s total cost and expenses surged 31.6% to $7,603.4 million due to a 31.8% increase in operating costs and 12.5% increase in general and administrative expenses.
Outstanding total debt principal as of Jun 30, 2018 was $25.9 billion. Enterprise Products Partners had consolidated liquidity of $3.6 billion, which comprised unrestricted cash on hand and available borrowing capacity. The partnership reported total capital spending of $983 million in the quarter under review.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 10.55% due to these changes.
At this time, Enterprise Products has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, 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 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 primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Enterprise Products has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.