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Macquarie (MIC) Earnings & Revenues Miss Estimates in Q3

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Macquarie Infrastructure Company’s (MIC - Free Report) third-quarter 2018 adjusted earnings came in at 29 cents per share, missing the Zacks Consensus Estimate of 56 cents by 48.2%. Also, the figure was lower than 48 cents per share reported in the year-ago quarter. 

Higher costs associated with acquisitions along with rise in interest expenses were primarily responsible for the year-over-year decline. However, the decrease was partially offset by lower taxes and fall in management fees.

The company generated revenues of $473.3 million, which rose 4.5% year over year.  The top line was driven by solid operational growth in the Atlantic Aviation segment. Service revenues grew 0.8% and product revenues rose 18.4%.

However, revenues missed the Zacks Consensus Estimate of $476.2 million.

Segment Details

Revenues from the International-Matex Tank Terminals (IMTT) segment came in at $118.2 million, down 11.9% year over year. It represented 25% of the company’s third-quarter revenues. The segment’s EBITDA declined 12% to $69.3 milliondue to a fall in capacity utilization levels.

The Atlantic Aviation segment generated revenues of $234.9 million, up 11.1% year over year and accounting for 49.6% of the company’s overall revenues. The segment’s EBITDA rose 2.3% from the last-year quarter to $65 million, on the back of contributions from acquired fixed base operations as well as rise in hangar rental income.

The Contracted Power segment’s revenues came in at $52.5 million, up 23.6% year over year. It represented 11.1% of third-quarter revenues. The segment’s EBITDA rose 14% from the prior-year quarter. Positive contributions associated with the expansion of the BEC power generation facility drove the performance.

Revenues in the MIC Hawaii segment were up 4.1% year over year to $68.9 million. It represented 14.6% of overall quarterly revenues. The segment’s EBITDA plummeted 137.5% from prior-year quarter and was hurt by higher expenses.

Operating Costs

In the reported quarter, Macquarie’s cost of services and cost of product sales increased 8.8% and 33.9% year over year, respectively. Selling and administrative expenses also increased 1.9%. Overall, operating expenses rose 7.2% to about $393.5 million.

Notable Developments

Macquarie is undertaking initiatives for the repurposing and repositioning of certain IMTT assets, to better align the unit according to shifts in global demand and trade flows. Particularly, the company expects to repurpose up to 3 million barrels of storage capacity at IMTT away from primarily heavy and residual oils to gasoline and distillates, chemicals and vegetable and/or tropical oils.

In October, the company successfully divested Bayonne Energy Center and secured all the required regulatory approvals related to the deal. The spin-off is likely to strengthen Macquarie’s balance sheet and liquidity in the days ahead.

Liquidity & Cash Flow

Exiting the quarter, the company had cash and cash equivalents of $50.2 million and long-term debt of about $3 billion. Its adjusted free cash flow for the quarter fell 11.7% year over year to $127.5 million, hurt by increase in interest expenses, taxes, maintenance and capital expenditures.

Macquarie authorized a cash dividend of $1.00 per share for the third quarter, payable Nov 15 to shareholders of record as on Nov 12.

Guidance

The company reiterated guidance for 2018 EBITDA and continues to expect the same in the range of $670-$705 million.

Zacks Rank & Other Stocks to Consider

Macquarie currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the same space are AVX Corporation (AVX - Free Report) , Crane Company (CR - Free Report) and Cintas Corporation (CTAS - Free Report) . While AVX sports a Zacks Rank #1, Crane and Cintas carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AVX surpassed estimates thrice in the trailing four quarters, the average beat being 33.96%.

Crane exceeded estimates in each of the trailing four quarters, the average beat being 5.04%.

Cintas surpassed estimates in each of the trailing four quarters, the average beat being 7.22%.

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