A month has gone by since the last earnings report for MPLX LP (MPLX - 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 MPLX LP 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.
MPLX Beats Q1 Earnings Estimates, Revenues Miss
MPLX LP reported first-quarter earnings of 61 cents per unit, beating the Zacks Consensus Estimate of 59 cents. The figure was in line with the year-ago level.
Revenues of $1,646 million were higher than first-quarter 2018 sales of $1,420 million. However, the top line lagged the Zacks Consensus Estimate of $1,658 million.
The strong quarterly earnings were supported by contribution from dropdown transactions related to the Logistics and Supply segment’s pipelines and refining logistics assets. However, lower-than expected total pipeline throughput volumes in this segment, and decreased pricing on product sales in the Gathering and Processing segment partially offset the positives.
MPLX’s operating income from the Logistics and Supply segment jumped 24.7% from a year ago to $480 million, attributable to contribution from dropdown transactions related to pipelines and refining logistics assets. Total pipeline throughput volume of 3,410 thousand barrels per day (MBPD) in the quarter increased 11% from the year-ago level but missed the Zacks Consensus Estimate of 3,814 MBPD. As a result, the segment’s operating income missed the Zacks Consensus Estimate of $539 million.
Operating income from the Gathering and Processing segment increased to $198 million from $172 million in the prior-year quarter on the back of higher gathered, processed and fractionated volumes, partially offset by decreased pricing on product sales.
Costs and Expenses
Total costs and expenses in the quarter were recorded at $968 million, higher than the year-ago level of $863 million.
Distributable cash flow available to limited partners in first-quarter 2019 was $757 million, providing 1.41x distribution coverage, up from $619 million in the year-ago period. Distribution per unit was 65.75 cents compared with 61.75 cents in the prior-year quarter. This marks a 6.5% hike from the year-ago period and 1.5% sequential increase, representing the 25th consecutive quarterly distribution increase.
Cash flow from operating activities in the quarter under review increased to $618 million from $450 million recorded in the corresponding period of 2018.
As of Mar 31, 2019, the partnership’s cash and cash equivalents were $93 million. Total debt amounted to $13.8 billion, while debt-to-capitalization ratio was 66.6%.
Andeavor Logistics Acquisition
On May 8, MPLX announced that it has agreed to acquire Andeavor Logistics LP through a unit-for-unit transaction that is expected to have a total value of $9 billion. Per the deal, for each Andeavor Logistics’ unit, its unitholders will receive 1.135 common units of MPLX. Notably, the value of the deal, which is expected to conclude in second-half 2019, represents a premium of 7%. Moreover, the deal states that Marathon Petroleum Corporation, the parent organization of MPLX, will get 1.0328 MPLX common units per Andeavor Logistics’ common unit held, leading to a discount of 2.4%. In addition to the synergies and increased backlogs, the deal is expected to increase MPLX’s footprint in the Permian Basin.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, MPLX LP has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MPLX LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.