It has been about a month since the last earnings report for Enterprise Products Partners (EPD - Free Report) . Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is 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 its most recent earnings report in order to get a better handle on the important drivers.
Enterprise Products Q3 Earnings Beat, Revenues Lag
Enterprise Products Partners L.P. reported third-quarter 2018 adjusted earnings per limited partner unit of 51 cents, which beat the Zacks Consensus Estimate of 46 cents. The bottom line improved from the year-ago quarter’s 30 cents.
Higher transportation volumes of natural gas liquid (NGL), natural gas and crude oil aided the partnership’s strong third-quarter earnings. This was, however, partially offset by a surge in operating expenses.
Quarterly revenues totaled $9,586 million, up from $6,887 million in the year-ago quarter. The top line, however, missed the Zacks Consensus Estimate of $9,788 million.
Quarterly distribution at Enterprise Products Partners increased 0.5% sequentially and 2.4% year over year to 43.25 cents per common unit. Adjusted distributable cash flow of $1.6 billion provided coverage of 1.7x.
Q3 Segmental Performance
Record third-quarter 2018 gross operating income of $1.1 billion from the NGL Pipelines & Services segment reflects a rise of 38% from $771 million a year ago. The upside can be attributed to higher transportation and fractionation volumes.
Natural Gas Pipeline and Services segment recorded gross operating income of $217 million compared with $171 million in the prior-year quarter. The upside can be attributed to a jump in transportation volumes.
Crude Oil Pipelines & Services segment’s gross operating income skyrocketed to $594 million from $190 million in the July-to-September quarter of 2017, thanks to a rise in marine terminal and transportation volumes.
Petrochemical & Refined Product Services segment saw its gross operating income grow to $249 million from the year-ago quarter’s $172 million. The rise was backed by an increase in gross operating margin at the propylene business.
Operating Cost and Expenses
During the third quarter of 2018, the partnership’s operating cost and expenses surged 31.6% to $8,001.9 million.
As of Sep 30, 2018, the partnership’s total outstanding debt principal was $26.1 billion. By the end of the third quarter, consolidated liquidity of the partnership was recorded at $3.3 billion. This includes both the unrestricted cash on hand and borrowing capacity under revolving credit facilities. The partnership reported total capital spending of $1.1 billion in the quarter under review.
In a separate announcement, the partnership declared intentions to expand its fractionation capacity of NGL by 150,000 barrels per day at its facilities in Mont Belvieu complex. With the commencement of the service of the new plant, expected by second-quarter 2020, the partnership will be able to increase its company-wide fractionation capacity to 1.5 million barrels per day.
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 5.3% due to these changes.
Currently, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Enterprise Products has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.