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Nustar Energy L.P. (NS) Up 0.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Nustar Energy L.P. (NS - Free Report) . Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nustar Energy L.P. 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.

Second-Quarter 2018 Results

NuStar Energy reported second-quarter 2018 earnings per limited partner unit of 15 cents, missing the Zacks Consensus Estimate of 21 cents due to a fall in Storage segment income caused by increased operating costs. However, the reported figure surged from the year-ago earnings of 5 cents per unit, due to higher contributions from the partnership’s Permian Crude System.

NuStar’s operating income was $79.8 million, up 8.8% from the prior-year quarter. Moreover, the partnership recorded a net income of $29.4 million in the quarter under review compared with $26.3 million in the year-ago quarter.

Quarterly revenues of $486.2 million surpassed the Zacks Consensus Estimate of $481 million. Moreover, the top line was higher than the year-ago level of $435.5 million, primarily due to increased revenues from pipeline and fuels marketing segments.

Cash Flow

Per NuStar’s latest earnings release, distributable cash flow available to limited partners in the second quarter was $82.1 million (providing 1.28x distribution coverage), increasing more than 36% from $60.3 million (providing 0.59x distribution coverage) in the year-ago quarter.

Segmental Performance

Pipeline: Total quarterly throughput volumes in the segment were 1,405,314 barrels per day (Bbl/d), up 29% from the year-ago period. While throughput volumes in the crude oil pipelines jumped 50.4% (owing to higher contribution from Permian crude system) from the year-ago quarter to 839,574 Bbl/d, throughput from the refined product pipelines inched up from 531,529 Bbl/d in the year-ago period to 565,740 Bbl/d.

As a result, throughput and other revenues rose 18.6% year over year to $150.3 million. However, operating and depreciation expenses rose 21.2% and 14.6% year over year, respectively. Concurrently, the segment’s operating income of $63 million was up from the year-ago figure of $52.9 million.

Storage: Throughput volumes in the Storage segment fell 1.7% year over year to 331,917 Bbl/d. The unit’s quarterly revenues fell from $158.6 million in the second quarter of 2017 to $157.5 million in the quarter under review, due to a plunge in throughput terminal revenues (from 22.1 million in second-quarter 2017 to $20.1 million in second-quarter 2018). The segment's operating income also decreased 4.7% to come in at $21.2 in the reported quarter.

Fuels Marketing: Product sales and other revenues from this segment increased to $180.5 million from $153.9 million in the year-ago quarter. The unit reported operating earnings of $2.9 million, higher than the income of $289 thousands recorded in the prior-year quarter. The results were supported by 26.6% fall in operating expenses and the streamlining efforts that the partnership executed last year.

Balance Sheet

As of Jun 30, 2018, the partnership’s total debt was $3.4 billion, representing a debt-to-capitalization ratio of 54.9%.

Guidance

For the full year, the company’s EBITDA is expected in the range of $700-$750 million. Capital spending for 2018 is expected in the range of $360-$390 million. Of the spending plan, around $190 million is directed toward developing the Permian Crude System. The capital budget also includes $50 million for the projects related to supply of refined products to Mexico.

The company expects its 2018 distribution coverage ratio for the common units in the range of 1.2x-1.3x.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -21.7% due to these changes.

VGM Scores

Currently, Nustar Energy L.P. has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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




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