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Why Is Energy Transfer Partners, L.P. (ETP) Down 3.6% Since 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 lost about 3.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Energy Transfer Partners, L.P. due for a breakout? 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. <p style="text-align: justify;"><strong>Energy Transfer Q2 Earnings and Sales Up Y/Y</strong></p><p style="text-align: justify;">Energy Transfer Partners delivered second-quarter 2018 earnings of 5 cents per limited partner unit, missing the Zacks Consensus Estimate of 17 cents. The weaker-than-expected results can be attributed to increased costs. However, the bottom line improved significantly from the year-ago loss of 4 cents in the second quarter of 2017 on the back of stronger year-over-year contribution from all the segments. Quarterly revenues increased to $9,410 million from $6,576 million a year ago. Further, the top line surpassed the Zacks Consensus Estimate of $8,524 million.</p><p style="text-align: justify;"><strong>Quarterly Cash Distribution</strong></p><p style="text-align: justify;">Last month, Energy Transfer Partners announced second-quarter distribution of 56.5 cents per unit ($2.26 per unit annualized), unchanged from the last reported quarter.</p><p style="text-align: justify;"><strong>EBITDA, Operating Income and Net Income</strong></p><p style="text-align: justify;">Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter were $2,051 million compared with $1,545 million a year ago. The improvement of 32.7% can be primarily attributed to strong performance from the&nbsp;<strong><em>Crude Oil Transportation and Services</em></strong>&nbsp;segment that came up with EBITDA of $548 million, surging a whopping 140.4% from the year-ago quarter. The partnership&rsquo;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 from West Texas.</p><p style="text-align: justify;">Further, the&nbsp;<strong><em>NGL Transportation and Services</em></strong>&nbsp;segment reported EBITDA of $461 million in the quarter under review compared with $388 million in the prior-year quarter. Increased NGL transportation and fractionation volumes from the Permian region drove the results of the above-mentioned segment. However, the results were partly offset by lower refined products terminal volumes, especially from the Midwest region.</p><p style="text-align: justify;">The&nbsp;<strong><em>Midstream</em></strong>&nbsp;segment generated EBITDA of $414 million compared with $412 million recorded in the second quarter of 2017. The segment benefited from higher production volumes in the Permian 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.</p><p style="text-align: justify;">The&nbsp;<strong><em>Interstate Transportation/Storage</em></strong>&nbsp;segment also reported higher EBITDA of $330 million compared with $262 million recorded a year ago on higher volumes of natural gas transported. Likewise, the results from the&nbsp;<strong><em>Intrastate Transportation/Storage</em></strong>&nbsp;segment were also stronger, with adjusted EBITDA of $208 million recorded in the quarter compared with $148 million in the year-ago quarter. However, EBITDA from all other segments decreased to $90 million from $107 million in the year-ago quarter.</p><p style="text-align: justify;">The partnership reported operating income of $943 million compared with $736 million in second-quarter 2017 on the back of higher revenues, despite increasing costs.</p><p style="text-align: justify;">Notably, the partnership reported total expense of $8,467 million in second-quarter 2018, reflecting an increase of 45% from the prior-year quarter. The higher expenses can primarily be attributed to increased cost of products sold, along with a rise in operating and depreciation costs.</p><p style="text-align: justify;">Energy Transfer Partners reported a net income of $602 million in the quarter under review, skyrocketing 103.4% from $296 million recorded in the year-ago quarter.</p><p style="text-align: justify;"><strong>Distributable Cash Flow</strong></p><p style="text-align: justify;">Distributable cash flow of $1,487 million was higher than the prior-year level of $978 million, reflecting a hike of 52%. The partnership&rsquo;s distribution coverage increased to $1.23x from 1.12x in the year-ago quarter.</p><p style="text-align: justify;"><strong>Balance Sheet</strong></p><p style="text-align: justify;">As of Jun 30, 2018, Energy Transfer Partners had a long-term debt (less current maturities) of $33,741 million. The debt-to-capitalization ratio of the company was about 49.8%.</p>

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 35.33% due to these changes.

VGM Scores

Currently, Energy Transfer Partners, L.P. has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Energy Transfer Partners, 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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