A month has gone by since the last earnings report for Magellan Midstream Partners (MMP - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Magellan Midstream due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Magellan Midstream Q3 Beats Earnings and Sales Estimates
Magellan Midstream delivered a comprehensive beat in the third-quarter earnings season, on the back of stellar show from its refined products and crude oil units, along with reduced expenses.
Magellan Midstream posted adjusted earnings per unit of $1.10, surpassing the Zacks Consensus Estimate of $1.02. Further, the bottom line surged from the year-ago profit of 87 cents/unit. The pipeline operator’s revenues of $638 million also surpassed the Zacks Consensus Estimate of $611 million. The top line also increased 11.3% from the third quarter of 2017.
Importantly, Magellan Midstream’s distributable cash flow (DCF) in third-quarter 2018 came in at $281.8 million, up 19.8% from the year-ago quarter.
Refined products: Robust demand for refined products drove transportation and terminals revenues to $300 million in the quarter, up from the prior-year figure of $289 million. Operating expenses were down around $6 million to a total of $112.3 million in the quarter under review. Product margin increased 512% on a year-over-year basis to stand at $23 million, primarily on the back of higher product sales revenues. Operating margin from the Refined Products segment was $214.7 million compared with $173.8 million in the year-ago quarter.
Crude Oil: Increased shipments on the Longhorn pipeline drove transportation and terminal revenues to $145 million, reflecting a 25% increase from the year-ago level of $116.3 million. While operating expenses increased 45% to amount to $45.2 million, product margin turned around from the year-ago loss to stand at $1 million, on the back of lower cost of product sales. The segment’s operating margin increased 33% year over year to come in at $153.8 million in the quarter under review.
Marine Storage: Higher average storage rates led to increased transportation and terminals revenues, which came in at $44 million in the quarter. Operating margin also recorded year-over-year growth of 12% to stand at $29 million, on the back of higher sales and lower operating expenses.
2018 Guidance Raised
Driven by robust third-quarter results, management now expects to generate record distributable cash flow of approximately $1.2 billion for the full year, up from the prior guidance of $1.1 billion. Magellan Midstream now expects its fourth-quarter earnings per unit of $1.24. Full-year diluted net earnings per unit are now projected to be $5.70 vis a vis the previous guidance of $4.10.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Magellan Midstream has an average Growth Score of C, however its Momentum Score is doing a lot 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Magellan Midstream has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.