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Enterprise Products (EPD) Q1 Earnings Beat, Capex View Cut

Zacks Equity Research

Enterprise Products Partners L.P. EPD reported first-quarter 2020 adjusted earnings per limited partner unit of 61 cents, beating the Zacks Consensus Estimate of 52 cents. The bottom line also increased from 57 cents per unit in the year-ago quarter.

Revenues declined to $7,483 million from $8,544 million in the prior-year quarter. The top line also missed the consensus estimate of $8,304 million.

The strong first-quarter earnings were supported by higher pipeline transportation volumes of NGL and contributions from the Permian Basin natural gas gathering system. The positives were partially offset by lower margins from Midland-to-ECHO 1 pipeline system.

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

 

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

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

Segmental Performance

Gross operating income at NGL Pipelines & Services increased from $959.2 million in the year-ago quarter to $1,042 million on higher pipeline transportation and fractionation volumes of NGL.

Natural Gas Pipelines and Services’ gross operating income increased to $283.8 million from $264.3 million in the year-ago quarter. Contributions from the partnership’s Permian Basin natural gas gathering system aided the segment, partly offset by lower natural gas transportation volumes.

Crude Oil Pipelines & Services recorded gross operating income of $452.9 million, which declined from $662.3 million in the prior-year quarter owing to lower margins from Midland-to-ECHO 1 pipeline system.

Gross operating income at Petrochemical & Refined Products Services amounted to $278.5 million compared with $242.6 million a year ago backed byhigher propylene production volumes.

DCF & Unit Repurchase

Quarterly distribution improved 1.7% year over year to 44.50 cents per common unit or $1.78 per unit on an annualized basis.

Adjusted distributable cash flow was $1,553.6 million, down 4.6% year over year, and provided coverage of 1.6x. Notably, the partnership retained $574 million of distributable cash flow in the first quarter. It bought back around 6.4 million units for $140 million in the first quarter.

Financials

During the quarter, the partnership’s capital expenditure was $1,079.5 million.

As of Mar 31, 2020, its outstanding total debt principal was $29.9 billion. Enterprise Products’ consolidated liquidity amounted to $7 billion, which included unrestricted cash on hand and available borrowing capacity.

Outlook

The partnership has lowered its 2020 growth capital budget by roughly $1 billion to a band of $2.5 billion to $3 billion. The partnership has also slashed 2020 sustaining capital expenditure guidance from $400 million to $300 million.

Moreover, Enterprise Products projects growth capital spending for 2021 and 2022 at $2.5 billion and $1.5 billion, respectively, considering the sanctioned projects.

Zacks Rank & Stocks to Consider

Enterprise Products currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector includeLilis Energy, Inc. LLEX, Key Energy Services, Inc. KEGX and CNX Resources Corporation CNX. While Lilis Energy and Key Energy sport a Zacks Rank #1 (Strong Buy), CNX Resources carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lilis Energy has witnessed upward estimate revisions for 2020 bottom line in the past 60 days.

Key Energy is likely to see bottom-line growth of 97.2% in 2020.

CNX Resources has witnessed upward estimate revisions for 2020 bottom line in the past 60 days.

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