Earnings estimates for Plains All American Pipeline, L.P. (PAA - Free Report) have been revised upward over the past 30 days, reflecting analyst’s confidence in the stock. The Zacks Consensus Estimate for 2019 earnings has moved 3.9% north to $2.11 per unit.
Also, the Zacks Consensus Estimate for current-year earnings per unit reflects a significant year-over-year surge of 30.9%. For 2019, the consensus estimate for earnings per unit is depicting a 71.4% year-over-year rise.
Houston, TX-based Plains All American Pipeline is involved in the transportation, storage, terminalling and marketing of crude oil, natural gas, natural gas liquids (NGL) and refined products in the United States and Canada.
Let’s focus on the factors that make Plains All American Pipeline an attractive stock to hold on to for greater returns.
Price Appreciation: Units of Plains All American Pipeline have rallied 17.3% in a year’s time, comparing favorably with the industry’s increase of 0.8%. The stock carries a Zacks Rank #2 (Buy).
VGM Score: The stock has a favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Back tested results show that stocks with an impressive VGM Score of A or B coupled with a bullish Zacks Rank offer the best investment bets.
Earnings Results & Surprise History: The partnership delivered earnings of 38 cents per unit in second-quarter 2018, beating the Zacks Consensus Estimate of 23 cents by 65.2%. The company has an encouraging earnings surprise history. Its bottom line surpassed the Zacks Consensus Estimate in two of the last four quarters, the average positive surprise being 9.68%.
Capital Spending: The firm is maintaining a systematic capital investment strategy to expand operations. After spending $1.1 billion on capital expansion in 2017, the partnership anticipates the same for 2018 to amount to $1.95 billion wherein 47.4% of the capex will be incurred with regard to Permian projects.
Also, the firm has increased its capex guidance by nearly $650 million, together for 2018 and 2019. Of this, 75% of the planned capital expenditure will be incurred pertaining to Permian projects.
Focus on Permian Basin: The partnership is expanding its operations in the Permian Basin to capitalize on improving demand. The firm is progressing with its plan to construct Cactus II pipeline systems coupled with the expansion of Sunrise I and II, which will strengthen its activities in the Permian Basin. Also, the partnership and Exxon Mobil Corporation (XOM - Free Report) entered into a joint venture of crude oil transportation pipeline construction covering a strip extending from multiple locations in the Permian Basin to the Texas Gulf Coast.
The firm expects to transport more than 1 million barrels of crude oil and condensate per day. The partnership’s equity stake will be less than 50% in the joint venture and expects the positive effects of the venture to drive EBITDA margin by the beginning of 2021.
Other Stocks to Consider
Some other top-ranked stocks from the same space are Shell Midstream Partners, L.P. (SHLX - Free Report) and TC PipeLines, LP (TCP - Free Report) . While the former sports a Zacks Rank #1 (Strong Buy), the latter carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shell Midstream Partners pulled off an average positive surprise of 7.93% in all the trailing four quarters. The Zacks Consensus Estimate for 2018 EPS has been raised 5.4% over the past 60 days to $1.36 per unit.
TC PipeLines delivered an average four-quarter beat of 11.96%. The consensus mark for 2018 EPS has been revised 10.1% upward over the past 60 days to $3.81 per unit.
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