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Magellan Midstream Beats 1Q Earnings

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Pipeline operator Magellan Midstream Partners LP (MMP - Free Report) announced mixed first-quarter 2013 results, with solid contribution from the Refined Products segment.

The Tulsa, Oklahoma-based oil distributor reported earnings per unit (EPU) of 51 cents (excluding mark-to-market commodity-related pricing adjustments), surpassing the Zacks Consensus Estimate of 49 cents and the prior-year quarter profit of 47 cents.

Total revenue of $432.4 million was down 12.4% year over year and short of the Zacks Consensus Estimate of $530.0 million.

Stock Split

In mid-Oct 2012, Magellan Midstream completed the split of its limited partner units in the 2:1 ratio. The quarterly results reflect the effects of the stock split.

Quarterly Distribution

Recently, Magellan Midstream raised its first-quarter 2013 cash distribution by 2% sequentially and 21% year over year to 50.75 cents per unit ($2.03 per unit annualized). Magellan Midstream’s new distribution is payable on May 15 to unitholders of record as on May 8, 2013.

Segmental Performance

Refined Products: In this segment, quarterly operating profits (before affiliate G&A and D&A expenses) were a record $160.2 million, up 27.7% year over year. The 13% increase in transportation volumes and higher gasoline and distillate shipments mainly contributed to the revenue growth.

Crude Oil: In this segment, operating margin was $22.7 million, down 5.5% year over year due to higher operating expenses. This was partially offset by increased crude oil transportation volumes and rates.

Marine Storage: This segment’s operating margin fell 9.4% year over year to $25.3 million, due to increased expenses and a lower utilization level.

Guidance Raised

Management at Magellan Midstream expects to generate distributable cash flows of approximately $580 million for full-year 2013 and is targeting an annual distribution growth of 10%. The partnership plans to achieve an annual payout hike of at least 10% in 2014. Magellan guided toward second quarter and full-year 2013 earnings per unit of 52 cents and $2.25, respectively.

Magellan Midstream plans to spend approximately $900 million on growth projects in 2013, with expenditures of an additional $320 million in 2014 to complete the projects. Moreover, the partnership is looking to put in more than $500 million in potential growth projects.

Zacks Rating

Magellan Midstream currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next 1 to 3 months.

In addition to Magellan Midstream, there are other pipeline operators that are expected to perform well in the coming 1 to 3 months. These include Copano Energy LLC with Zacks Rank #1 (Strong Buy), and Energy Transfer Partners LP (ETP - Free Report) and Summit Midstream Partners LP (SMLP - Free Report) with Zacks Rank #2 (Buy).

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