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Calumet Specialty Units Jump on Rising Operating Cash Flow

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Calumet Specialty Products Partners, L.P. CLMT recently provided a clear picture of second-quarter operations and liquidity position. Following the upbeat news, the stock jumped 9.9%.

Cash flow provided by operating activities is expected to be above $60 million for the second quarter. The partnership recorded $19.9 million of net cash used in operating activities in the prior quarter. Last April, the partnership reduced its 2020 capital spending guidance by 35% to $50-$60 million from the original expectation of $80-$90 million. Management’s aggressive efforts have enabled the partnership to generate positive free cash flow in the second quarter.

Per Steve Mawer, CEO of Calumet Specialty, the partnership will continue to generate positive cash flow from operations in the remainder of 2020. To navigate through the current market volatility, the partnership is likely to focus on improvement in project executions, cost reductions and other measures. Notably, it had identified plant operating cost reduction of $20-$30 million during the beginning of the second quarter.

At second quarter-end, Calumet Specialty had a total of $245 million liquidity, lower than the first quarter’s $325.6 million. The partnership had around $105 million of cash and cash equivalents at the end of the June quarter, up from $103.7 million in the first quarter. However, its undrawn capacity on the revolving credit facility decreased to about $140 million in the second quarter from the first quarter’s $221.9 million. Notably, the partnership had $1,358.7 million of long-term debt at the end of the March quarter.

The partnership’s operating strength is expected to help it in reducing the debt level even in the current market uncertainty.

The Zacks Consensus Estimate for the partnership’s second-quarter loss per share has been narrowed to 39 cents from a loss of 50 cents in the past 30 days. It has witnessed two upward movements and no downward estimate revision during this time period.

Price Performance

The stock has risen 114.7% in the past three months compared with a 33.2% jump of the industry it belongs to.

Zacks Rank & Other Stocks to Consider

Currently, the partnership has a Zacks Rank #1 (Strong Buy). Other top-ranked players in the energy space include NGL Energy Partners LP NGL, Antero Resources Corporation AR and Centennial Resource Development, Inc. CDEV, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.

Antero Resources’ bottom line for second-quarter 2020 is expected to rise 33.3% year over year.

Centennial Resource’s second-quarter earnings estimates have improved over the past 30 days, with three upward estimate revisions and no downward movement.

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Calumet Specialty Products Partners, L.P. (CLMT) : Free Stock Analysis Report
NGL Energy Partners LP (NGL) : Free Stock Analysis Report
Antero Resources Corporation (AR) : Free Stock Analysis Report
CENTENNIAL RES (CDEV) : Free Stock Analysis Report
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