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Will Enterprise Products (EPD) Beat Estimates in Q4 Earnings?

Zacks Equity Research
Energy Transfer's (ET) first-quarter 2019 revenues improve on a year-over-year basis.

Enterprise Products Partners L.P. EPD is scheduled to report fourth-quarter 2018 results on Jan 31, before the opening bell.

The midstream energy player beat the Zacks Consensus Estimate in all of the last four quarters, the average positive earnings surprise being 9.3%. For the fourth quarter of 2018, the Zacks Consensus Estimate for earnings per unit is pegged at 50 cents, reflecting a decline of 2% from the year-ago quarter’s tally.

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

Which Way are Estimates Treading?

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

The Zacks Consensus Estimate for fourth-quarter earnings of 50 cents has seen no upward movement in the past seven days. The estimate reflects year-over-year growth of 35.1%.

Further, the Zacks Consensus Estimate for revenues is pegged at $9,460 million for the impending quarter, showing an increase of 12.2% year over year.

Why a Likely Positive Surprise?

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

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.26%. This is a very meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Enterprise Products carries a Zacks Rank #3 (Hold), which when combined with +5.26% ESP, makes us confident about a beat.

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

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

The Zacks Consensus Estimate for gross operating margin from the NGL Pipeline & Services segment is pegged at $1,026 million for the fourth quarter, showing a decline from $1,063 million in the last reported quarter but reflecting an improvement from the year-ago quarter’s tally of $760 million. NGL pipeline transportation volumes for the quarter are expected at 3,519 thousand barrels per day (MBPD), higher than 3,487 MBPD in the last reported quarter.

The Natural Gas Pipeline and Services segment is expected to come up with gross operating margin of around $213 million, up from $179 million in the year-ago quarter. Natural gas pipeline transportation volumes are expected at 13,834 billion British thermal units per day (BBtus/d), lower than 13,939 BBtus/d in the last reported quarter.

The Zacks Consensus Estimate for gross operating margin in the Crude Oil Pipelines & Services segment is pegged at $401 million for the fourth quarter, reflecting a decline from $594 million in the last reported quarter but indicating a rise from $296 million in the year-ago quarter. Crude oil pipeline transportation volumes are expected to be 1,981 MBPD in the quarter, lower than the previous quarter’s figure of 2,065 MBPD.

The Zacks Consensus Estimate for gross operating margin in the Petrochemical & Refined Product Services unit is pegged at $250 million, reflecting a rise from $172 million in the fourth quarter of 2017. Petrochemical transportation volumes are expected at 774 MBPD in the fourth quarter, lower than the preceding quarter’s tally of796 MBPD.

Other Stocks to Consider

Here are other companies from the energy sector, which according to our model, also have the right combination of elements to post earnings beat in the to-be-reported quarter:

Ensco plc ESV is a leading supplier of offshore contract drilling services to the oil and gas industry. The company has an Earnings ESP of +1.8% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwestern Energy Company SWN, based in Houston, TX, engages in the exploration, development and production of natural gas and crude oil in the United States. The company has an Earnings ESP of +2.3% and a Zacks Rank #3.

Fort Worth, TX-based Range Resources Corp RRC is an independent oil and gas exploration and production company. The company has an Earnings ESP of +4.5% and a Zacks Rank #3.

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