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Why Is NuStar Energy L.P. (NS) Down 6.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for NuStar Energy L.P. (NS - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NuStar Energy 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 catalysts.

NuStar Posts Q3 Loss on Merger Costs, DCF up Y/Y

NuStar Energy reported third-quarter 2018 loss per limited partner unit of $3.49, marginally narrower than the Zacks Consensus Estimate of $3.50. After posting a string of earnings per unit over several years, the company posted quarterly loss this time around amid one-time costs related to its merger with general partner, NuStar GP Holdings. However, excluding this charge, its earnings per unit would have amounted to 13 cents, which is also lower than 15 cents recorded in the prior-year quarter.

NuStar’s operating income was $95.3 million, up 3.8% from the prior-year quarter. Moreover, the partnership recorded a net income of $48.1 million in the quarter under review compared with $38.6 million in the year-ago quarter.

Quarterly revenues of $490.4 million also surpassed the Zacks Consensus Estimate of $462 million. Moreover, the top line was higher than the year-ago level of $440.6 million.

Cash Flow

Per NuStar’s latest earnings release, distributable cash flow (DCF) available to limited partners was $88.5 million (providing 1.38x distribution coverage), increasing more than 32% from $66.9 million (providing 0.66x distribution coverage) in the year-ago quarter.

Segmental Performance

Pipeline: Total quarterly throughput volumes in the segment were 1,481,770 barrels per day (Bbl/d), up 22.7% from the year-ago period. While throughput volumes in the crude oil pipelines jumped 34.5% (owing to higher contribution from the Permian crude system) from the year-ago quarter to 914,450 Bbl/d, throughput from the refined product pipelines inched up from 527,148 Bbl/d in the year-ago period to 567,320 Bbl/d. As a result, throughput and other revenues rose 18.5% year over year to $162.8 million. Concurrently, the segment’s operating income of $77 million was up from the year-ago figure of $61.1 million.

Storage: Throughput volumes in the Storage segment rose 13.7% year over year to 335,118 Bbl/d. The unit’s quarterly revenues fell to $154.1 million from $158.1 in the third quarter of 2017, due to a plunge in storage terminal revenues (from 136.9 million in third-quarter 2017 to $132.9 million in third-quarter 2018). Moreover, depreciation and operating costs recorded an increase. As a result, the segment's operating income decreased 21.6% to stand at $46.5 in the reported quarter.

Fuels Marketing: Product sales and other revenues from this segment increased to $175.1 million from $147.5 million in the year-ago quarter. Operating costs decreased 50%, resulting in income from the segment to come in at $1,890 million, turning around from the year-ago period’s loss of $1,532 million.

Balance Sheet

As of Sep 30, 2018, the partnership’s total debt was $3,387million, representing a debt-to-capitalization ratio of 53.8%.

Guidance

For the full year, the partnership downwardly revised its EBITDA guidance to the range of $670-$720 million from prior expectation of $700-$750 million.

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 20% due to these changes.

VGM Scores

Currently, NuStar Energy L.P. has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

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