A month has gone by since the last earnings report for Enterprise Products Partners (EPD - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is 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 the most recent earnings report in order to get a better handle on the important catalysts.
Enterprise Products Q3 Earnings & Revenues Miss Estimates
Enterprise Products reported third-quarter 2019 adjusted earnings per limited partner unit of 50 cents, which missed the Zacks Consensus Estimate of 53 cents. The bottom line also declined from 51 cents in the year-ago quarter.
Revenues declined to $7,964.1 million from $9,585.9 million in the prior-year quarter. The top line also missed the consensus estimate of $8,225 million.
The weak results stemmed from lower processing margins, increased NGL Pipelines & Services’ operating expenses and lower equity NGL production. This was partially offset by higher natural gas transportation volumes and increased production volumes in the propylene business.
Distributable Cash Flow
Quarterly distribution improved 2.3% year over year to 44.25 cents per common unit or $1.77 per unit on an annualized basis. Adjusted distributable cash flow was $1.6 billion, up 4.7% year over year and provided coverage of 1.7x.
Gross operating income at NGL Pipelines & Services decreased from $1,063.1 million in the year-ago quarter to $1,008.3 million. The downside can be attributed to lower processing margins, increased operating expenses and lower equity NGL production. This was partially offset by a 47% increase in fee-based processing volumes at the Permian Basin plants.
Natural Gas Pipelines and Services’ gross operating income jumped to $258.5 million from $216.9 million in the year-ago quarter. The upside was supported by a record transportation volume of 14.5 trillion British thermal unit of natural gas per day.
Crude Oil Pipelines & Services recorded gross operating income of $496.2 million, falling from $594.2 million in the prior-year quarter, which included higher mark-to-market gains on financial instruments.
Gross operating income at Petrochemical & Refined Products Services amounted to $288.4 million compared with $249.4 million a year ago. The improvement can be primarily attributed to higher gross operating margins and increased production volumes in the propylene business.
During the quarter, the partnership’s capital expenditure was $1,041.3 million.
As of Sep 30, 2019, outstanding total debt principal of the partnership was $28.2 billion. Enterprise Products’ consolidated liquidity amounted to $6.2 billion, which included unrestricted cash on hand of $1.2 billion and available borrowing capacity.
Enterprise Products expects to complete the construction of growth developments worth $2.6 billion through the fourth quarter of 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Enterprise Products has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 C. 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, Enterprise Products has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.