It has been about a month since the last earnings report for Plains All American Pipeline (PAA - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Plains All American 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.
Plains All American Q2 Earnings Beat, Guidance Up
Plains All American Pipeline, L.P. reported second-quarter 2019 adjusted earnings of 67 cents per unit, beating the Zacks Consensus Estimate of 44 cents by 52.3%. Moreover, the bottom line soared 148.1% from the year-ago period. The improvement was due to increased volume in its Permian Basin Systems.
In the quarter under review, the partnership reported GAAP earnings of 54 cents per unit, up from the year-earlier figure of 7 cents.
Total revenues in the second quarter amounted to $8,253 million, beating the Zacks Consensus Estimate of $8,227 million by 0.3%. Revenues also improved 2.1% from $8,080 million in the prior-year period.
In the Transportation segment, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $410 million increased 13.9% from the year-ago period, courtesy of expanded volumes in Permian Basin systems and the start-up of its Sunrise II pipeline in fourth-quarter 2018. Pipelines in the central region also contributed to the strong performance.
In the Facilities segment, adjusted EBITDA of $172 million was almost in line with the year-ago figure of $171 million.
The Supply and Logistics segment reported adjusted EBITDA of $200 million against a loss of $26 million in the comparable period last year. This improvement was due to favorable crude oil differentials in the Permian Basin and improved NGL margins.
Highlights of the Release
In the quarter under review, Plains All American’s total costs and expenses were $7,802 million, down 2.4% year over year. This decline in total expenses was due to lower purchases and related costs, as well as a decline in general and administrative expenses.
Interest expenses declined 7.2% year over year to $103 million.
The partnership’s operating income grew significantly to $451 million from $88 million in the prior-year quarter.
As of Jun 30, 2019, current assets were $4,282 million compared with $3,533 million on Dec 31, 2018.
As of Jun 30, 2019, Plains All American had a long-term debt of $9,176 million compared with $9,143 million on Dec 31, 2018.
As of the same date, its long-term debt to total book capitalization ratio was 41%, down from 43% at the end of 2018.
Plains All American now expects 2019 earnings to be $2.25 per unit, up from previous expectation of $2.10. The partnership now expects full-year 2019 adjusted EBITDA to be $2,975 million, up from $2,850 million expected earlier.
Plains All American also raised its 2019 capital expenditure guidance to $1,500 million from earlier expectation of $1,350 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.03% due to these changes.
At this time, Plains All American has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 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, Plains All American has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.