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Can Enterprise (EPD) Retain Beat Streak in Q2 Earnings?

Zacks Equity Research

Enterprise Products Partners LP EPD is expected to beat estimates when it reports second-quarter 2019 results on Jul 31, before the opening bell.

It reported first-quarter 2019 adjusted earnings per limited partner unit of 57 cents, beating the Zacks Consensus Estimate of 47 cents on the back of higher transportation volumes from three of its four segments. Notably, the midstream energy player beat the Zacks Consensus Estimate in the last four quarters, with the average being 17%.

Enterprise Products Partners L.P. Price and EPS Surprise

Enterprise Products Partners L.P. Price and EPS Surprise
Enterprise Products Partners L.P. Price and EPS Surprise

Enterprise Products Partners L.P. price-eps-surprise | Enterprise Products Partners L.P. Quote

Let’s see how things are shaping up for the upcoming quarterly release.

Which Way are Estimates Trending?

Let’s take a look at the estimate revision trend to get a clear picture of analysts’ assessment about the partnership’s upcoming earnings release.

The Zacks Consensus Estimate for second-quarter earnings of 52 cents has seen three upward revisions and one downward movement in the past 30 days. The estimate indicates 13% growth from the year-ago reported figure.

The Zacks Consensus Estimate for revenues is pegged at $8.8 billion for the impending quarterly release, suggesting a 3.9% increase from the prior-year reported number.

Why a Likely Positive Surprise?

The proven Zacks model shows that Enterprise is likely to beat on earnings because it has the right combination of the two key ingredients.   

Earnings ESP: The partnership has an Earnings ESP of +2.03%, representing the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. The Earnings ESP is a leading indicator of a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Enterprise currently carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. Further, a positive ESP makes us confident about an earnings beat for the stock this reporting cycle.

Notably, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates. On the contrary, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

What’s Driving the Better-Than-Expected Performance?

In the second-quarter, Enterprise is expected to generate stable fee-based earnings from its pipeline network — spreading across 49,200 miles — that transports natural gas liquid (NGL), natural gas and crude oil. Favorable business scenarios are being reflected in the Zacks Consensus Estimate for the following reporting segments of the leading midstream energy firm:

The Zacks Consensus Estimate for gross operating margin from the NGL Pipelines & Services segment is pegged at $941 million for the second quarter, implying an increase from $914 million reported a year ago. NGL pipeline transportation volumes for the quarter are expected at 3,760 thousand barrels per day (MBPD), higher than 3,408 MBPD registered in the year-earlier quarter.

The Natural Gas Pipelines and Services segment is projected to come up with a gross operating margin of around $255 million, up from $213 million reported in the year-ago quarter. Natural gas pipeline transportation volumes are anticipated to be 14,339 billion British thermal units per day (BBtus/D), higher than 13,654 BBtus/D reported in the prior-year quarter.

The Zacks Consensus Estimate for second-quarter gross operating margin for the Crude Oil Pipelines & Services segment stands at $509 million, suggesting a significant improvement from $53 million reported a year ago. Crude oil pipeline transportation volumes are predicted to be 2,328 MBPD in the quarter to be reported, higher than 2,050 MBPD reported in the June quarter of 2018.

Higher transportation volumes from the above-mentioned three segments are expected to boost the partnership’s second-quarter earnings as well.

Other Stocks to Consider

Here are some other companies worth considering from the energy sector, which per our model, also have the right combination of elements to beat estimates in the to-be-reported quarter:

Holly Energy Partners, L.P. HEP has an Earnings ESP of +1.18% and is a #2 Ranked player. The partnership is anticipated to release second-quarter 2019 earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada Corporation TRP is set to report second-quarter 2019 earnings on Aug 1. The stock has an Earnings ESP of +0.34% and a Zacks Rank #3.

Enbridge Inc. ENB is set to report second-quarter 2019 earnings on Aug 2. The stock has an Earnings ESP of +8.88% and a Zacks Rank #3.

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Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report
 
TransCanada Corporation (TRP) : Free Stock Analysis Report
 
Holly Energy Partners, L.P. (HEP) : Free Stock Analysis Report
 
Enbridge Inc (ENB) : Free Stock Analysis Report
 
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Zacks Investment Research