A month has gone by since the last earnings report for Magellan Midstream Partners (MMP - Free Report) . Shares have added about 1.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Magellan Midstream due for a pullback? 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 drivers.
Magellan Midstream Q1 Earnings Top, Sales Lag
Magellan Midstream Partners reported adjusted earnings per unit of $1.06, surpassing the Zacks Consensus Estimate of $1.00 and the firm’s forecast of 90 cents. Gains derived from the company’s divestment of a portion of interest in the Bridge Tex pipeline and sale of assets related to the Delaware Basin Pipeline project led to the outperformance. Stronger contribution from Crude Oil and Marine Storage units also aided the results. The bottom line was also a tad higher than the year-ago profit of $1.05 cents a unit.
Quarterly revenues of $628.9 million missed the Zacks Consensus Estimate of $683 million. The top line was also lower than the year-ago level of $678.8 million.
Refined Products: Revenues from the segment came in at $422.6 million, down 14% from the year-ago period owing to lower volumes. Notably, total volumes shipped in the quarter under review totaled 116.1 million barrels versus 118 million barrels a year ago. As such, operating margin also declined to $171.9 million in first-quarter 2019 from $211.4 million in the corresponding period of 2018. Depreciation costs increased 22.8% y/y to $35.5 million. As such, operating profit of the segment declined 41.4% y/y to $108.6 million amid higher costs, and lower volumes and operating margins.
Crude Oil: Quarterly revenues came in at $156.8 million, up 14.7% y/y on the back of higher volumes. Total volumes shipped in the quarter totaled 79.4 million barrels, up from 55.7 million barrels in the year-ago period. As such, operating margin increased to $140.2 million from $127.7 million recorded in the year-ago period. Operating profit came in at $112.3 million, up 9% y/y on the back of higher volumes and margins, partly offset by increased depreciation and G&A costs.
Marine Storage: Revenues from the segment came in at $50.5 million compared with the year-ago period’s $49.5 million. Operating margin increased 28% y/y to $38.4 million on the back of higher other income and lower operating expenses. Operating profit also surged 51% y/y to $23.1 million in the quarter under review.
DCF & Balance Sheet
Distributable cash flows in the first quarter of 2019 came in at $318 million, up from $258.9 million in the year-ago period on the back of divestment gains.
Notably, on Apr 25, the partnership announced first-quarter cash distribution of $1.005 per unit ($4.02 a unit on an annualized basis), representing 7% and 1% yearly and sequential growth, respectively. This represents the 68th distribution hike since the partnership became public. The new distribution was paid on May 15 to unitholders of record as of May 8.
As of Mar 31, the partnership had cash and cash equivalents of $13.5 million, and long-term debt of $4.279.7 million (with a debt-to-capital ratio of 62%).
For the full year, management now expects to generate distributable cash flows of approximately $1.18 billion versus prior forecast of $1.14 billion. Also, it is targeting annual distribution growth of 5%.Magellan Midstream projects second-quarter earnings per unit to be$1.13 cents. Full-year earnings per unit are now revised upward to $4.05 from the previous guidance of $3.80.The partnership plans to spend approximately $1.1 billion on expansion projects in 2019.
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 9.69% due to these changes.
At this time, Magellan Midstream has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Magellan Midstream has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.