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Can Enterprise (EPD) Retain Beat Streak in Q1 Earnings?

Zacks Equity Research
ONE Gas (OGS) reports strong Q1 results, courtesy of new rates, colder-than-normal weather and customer growth.

Enterprise Products Partners LP EPD is scheduled to report first-quarter 2019 results on May 1, before the opening bell.

The midstream energy player beat the Zacks Consensus Estimate in all the last four quarters, the average being 12.4%.

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 the analysts’ assessment about the partnership’s upcoming earnings release.

The Zacks Consensus Estimate for first-quarter earnings of 47 cents has seen no upward movement in the past seven days. The estimate indicates 20.5% growth from the year-ago reported figure.

However, the Zacks Consensus Estimate for revenues is pegged at $8.9 billion for the impending quarterly release, suggesting a 4.8% decline from the prior-year reported number.

Why a Likely Positive Surprise?

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

Earnings ESP: Enterprise Products has an Earnings ESP of +0.26%, representing the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. It 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 Products carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. Further, a positive ESP makes us confident about a likely earnings beat for the stock this reporting cycle.

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

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

Enterprise Products is expected to generate stable fee-based revenues from its pipeline network – spreading across 49,200 miles –, transporting natural gas liquid (NGL), natural gas and crude oil. The positive 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 $961 million for the first quarter, implying an increase from $885 million, reported a year ago. NGL pipeline transportation volumes for the quarter are expected at 3,682 thousand barrels per day (MBPD), higher than 3,287 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 $246 million, up from $198 million, reported in the year-ago quarter. Natural gas pipeline transportation volumes are anticipated at 14,124 billion British thermal units per day (BBtus/D), higher than 13,029 BBtus/D, reported in the prior-year quarter.

The Zacks Consensus Estimate for gross operating margin in the Crude Oil Pipelines & Services segment stands at $409 million for the first quarter, suggesting a significant improvement from $220 million, reported a year ago. Crude oil pipeline transportation volumes are predicted to be 2,046 MBPD in the quarter under review, higher marginally than 2,034 MBPD, reported in the March quarter of 2018.

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:

Apache Corporation APA has an Earnings ESP of +6.67% and a Zacks Rank of 2. The company is slated to announce first-quarter earnings on May 1. You can see the complete list of today’s Zacks #1 Rank stocks here.  

Devon Energy Corp. DVN is set to report first-quarter earnings on Apr 30. The stock has an Earnings ESP of +7.80% and is a Zacks #2 Ranked player.

Cimarex Energy Co. XEC has an Earnings ESP of +2.52% and is a #2 Ranked player. The company is anticipated to release first-quarter earnings on May 8.

Zacks' Top 10 Stocks for 2019

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Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report
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