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Enterprise Products (EPD) Down 2.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Enterprise Products Partners (EPD - Free Report) . Shares have lost about 2.7% in that time frame, outperforming 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 Q1 Earnings Beat Estimates, Revenues Miss

Enterprise Products Partners reported first-quarter 2019 adjusted earnings per limited partner unit of 57 cents, which beat the Zacks Consensus Estimate of 47 cents. The bottom line also improved from earnings of 41 cents in the year-ago quarter.

Revenues in the quarter declined to $8,543.5 million from $9,298.5 million in the year-ago period. The top line also missed the Zacks Consensus Estimate of $8,860 million.

The strong earnings were supported by higher transportation volumes in three of its four segments, partially offset by lower-than-expected refined products and petrochemical marine terminal volumes.

Distributable Cash Flow

Quarterly distribution improved 2.3% year over year to 43.75 cents per common unit or $1.75 per unit on an annualized basis. Adjusted distributable cash flow was at a record level of $1.6 billion, up 18% year over year and provided coverage of 1.7x. The partnership retained $665 million of cash flow in the quarter under review.

Segmental Performance

Gross operating income in the NGL Pipeline & Services segment increased to $959.2 million from $884.9 million in the year-ago quarter. The upside can be attributed to higher fee-based processing volumes in several processing plants and contribution from the Orla facility that came online last May. Moreover, a year-over-year surge in NGL pipeline transportation volumes contributed to the growth.

Natural Gas Pipeline and Services’ gross operating income jumped to $264.3 million from $197.9 million in the year-ago quarter. The upside was backed by higher transportation volumes and average capacity fees.

Gross operating income in the Crude Oil Pipelines & Services segment was $662.3 million compared with $220 million in the prior-year quarter. The uptick was propelled by higher volumes from West Texas and Eagle Ford Crude Oil pipeline systems, as well as the Midland-to-ECHO 1 pipeline. Notably, total crude oil pipeline volumes increased 12% year over year to a record 2.2 million barrels per day (BPD) in first-quarter 2019. Also, total crude oil marine terminal volumes jumped 40% year over year to a record 886 thousand BPD in the reported quarter.

Gross operating income in the Petrochemical & Refined Product Services segment amounted to $242.6 million compared with the prior-year level of $271.9 million. The decline was caused by lower pipeline transportation volumes in the segment. Refined products and petrochemical marine terminal volumes declined to 338 thousand BPD in first-quarter 2019 from 370 thousand BPD in the year-ago period.

Financials

During the quarter, the partnership’s capital expenditure was $1,148.9 million.

Outstanding total debt principal as of Mar 31, 2019 was $27.1 billion. Enterprise Products’ consolidated liquidity amounted to $4.7 billion, which includes unrestricted cash on hand and available borrowing capacity.

Outlook

The partnership expects Permian crude oil volumes to increase around 700,000 barrels per day (BPD) through 2019. The total increased volume is expected to head toward international markets. Moreover, the partnership anticipates around 300,000 BPD of new ethane demand to be generated from the U.S. Gulf Coast’s new ethylene facilities, which will come online this year.

It intends to place $3.5 billion worth of projects online by the end of 2019. Notably, the partnership is facing high demand for Permian transportation capacity. It is now considering the development of another long-haul crude pipeline from the Permian Basin to Houston.

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 5.07% due to these changes.

VGM Scores

Currently, Enterprise Products has a strong Growth Score of A, a grade with the same score on the momentum front. 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 A. 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. 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.


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