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Factors to Know Ahead of CrossAmerica's (CAPL) Q1 Earnings

Nilanjan Choudhury

CrossAmerica Partners LP CAPL is scheduled to release first-quarter 2019 results after the closing bell on Monday, May 6. The current Zacks Consensus Estimate for the quarter under review is a profit of 13 cents per unit on revenues of $636.1 million.

In the preceding three-month period, the motor fuel distributor beat the consensus mark by 46.7%, buoyed by its wholesale segment performance.

As far as earnings surprises are concerned, the Allentown, PA-based fuel supplier has a mixed record, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below:

CrossAmerica Partners LP Price and EPS Surprise


CrossAmerica Partners LP Price and EPS Surprise | CrossAmerica Partners LP Quote

Investors are keeping their fingers crossed and hoping that the partnership can surpass earnings estimate this time around.. However, our model indicates that CrossAmerica might not beat on earnings in the to-be-reported quarter.

Let’s delve deeper and find out the factors impacting the results.

Factors to Consider This Quarter

CrossAmerica’s business is centered on its Wholesale unit. Mainly involved in the distribution of wholesale motor fuel, the segment makes up more than 90% of the partnership’s adjusted EBITDA. The partnership’s wholesale fuel margins, which grew 29% year over year in the fourth quarter, is likely to improve further in the fourth quarter.

Fuel distribution volumes in 2018 improved by 2% over the previous year and we expect CrossAmerica to maintain the trend in the upcoming quarter as well. This would favorably affect the partnership’s earnings and cash flows. As it is, CrossAmerica is likely to benefit from the robust demand from diesel, which commands a higher premium.

However, CrossAmerica’s capital expenditures are on rise, while debt continues to remain on the higher side. In the fourth quarter of 2018, the partnership’s sustaining capital outlay rose 2.5%. Meanwhile, total long-term debt at year-end 2018 was $519.3 million, only marginally lower than the year-ago debt of $529.1 million. The partnership’s profit levels can be hurt if the high leverage is not brought down in the near-to-medium term..

What Does Our Model Say?

Our proven model too does not conclusively predict that CrossAmerica will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.0%.

Zacks Rank: CrossAmerica currently has a Zacks Rank #3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

While earnings beat looks uncertain for CrossAmerica, here are some companies from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

TransCanada Corporation TRP has an Earnings ESP of +5.48% and a Zacks Rank #2 (Buy). The company is anticipated to release earnings on May 3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cimarex Energy Co. XEC has an Earnings ESP of +1.50% and a Zacks Rank #2. The company is anticipated to release earnings on May 9.

Abraxas Petroleum Corporation AXAS has an Earnings ESP of +133.33% and a Zacks Rank #3. The company is expected to release earnings on May 6.

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CrossAmerica Partners LP (CAPL) : Free Stock Analysis Report
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