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Factors to Know Ahead of CrossAmerica's (CAPL) Q4 Earnings

Nilanjan Choudhury

CrossAmerica Partners CAPL is scheduled to release fourth-quarter 2018 results after the closing bell on Monday, Feb 25. The current Zacks Consensus Estimate for the quarter under review is a profit of 15 cents per unit on revenues of $663 million.

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

As far as earnings surprises are concerned, the Allentown, PA-based fuel supplier has a mixed record, having met/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.

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

Factors to Consider This Quarter

CrossAmerica’s business is centered around 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 19% year over year in the third quarter, is likely to improve further in the fourth quarter.

Third quarter fuel distribution volumes improved by 2% over the comparable period of last 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 and debt are on rise. In the third quarter of 2018, the partnership’s sustaining capital outlay rose 14.3%, while total consolidated debt was up by from the previous period to 538.1 million. The partnership’s profit levels can be hurt if the trend continues.

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 #1 (Strong Buy), 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 firms 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:

Cabot Oil & Gas Corporation COG has an Earnings ESP of +1.84% and a Zacks Rank #3. The company is anticipated to release earnings on Feb 22. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Denbury Resources Inc. DNR has an Earnings ESP of +2.86% and a Zacks Rank #3. The company is anticipated to release earnings on Feb 27.

Southwestern Energy Company SWN has an Earnings ESP of +6.06% and a Zacks Rank #3. The company is expected to release earnings on Feb 28.

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