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Key Factors to Watch Out for Ahead of MPLX's Q2 Earnings

Zacks Equity Research

MPLX LP MPLX is scheduled to release second-quarter 2019 results on Aug 1.

In the last reported quarter, the Findlay, OH-based energy midstream service provider recorded earnings of 61 cents per unit, beating the Zacks Consensus Estimate of 59 cents on the back of contribution from dropdown transactions related to the Logistics and Supply segment’s pipelines and refining logistics assets. As far as earnings surprises are concerned, the oil and gas logistics operator has a mixed record, having surpassed the Zacks Consensus Estimate twice in the last four quarters, with average negative surprise of 4.2%. This is depicted in the graph below:

MPLX LP Price and EPS Surprise

MPLX LP Price and EPS Surprise

MPLX LP price-eps-surprise | MPLX LP Quote

Let’s see how things are shaping up for this announcement.

Which Way are Estimates Treading?

Let’s take a look at estimate revisions to get a clear picture of what analysts are thinking about MPLX before the earnings release.

The Zacks Consensus Estimate for second-quarter earnings per unit of 60 cents has seen one upward and downward revision each in the past 30 days. This figure indicates year-over-year growth of 9.1%.

The Zacks Consensus Estimate for revenues is pegged at $1.6 billion for the to-be-reported quarter, indicating a rise of 4.2% from the year-ago quarter.

Now let’s delve deeper to find out the factors impacting the upcoming results.

Factors to Consider

High demand for midstream assets is a positive for the upcoming results of this large-cap partnership, which owns, operates and develops midstream energy infrastructures and logistics assets, primarily for its sponsor Marathon Petroleum Corporation MPC.

The Zacks Consensus Estimate for the Logistics and Storage segment’s second-quarter 2019 operating income is $542 million, higher than the year-ago reported figure of $526 million.

The Gathering and Processing segment is expected to get a boost from total gathering throughput in the to-be-reported quarter. The Zacks Consensus Estimate for gathering throughput volumes from Southwest Operations is pegged at 1,570 million cubic feet per day (MMcf/d), higher than 1,494 MMcf/d in the year-ago period. Gathering throughput volumes from Marcellus Operations are expected to jump to 1,282 MMcf/d from the year-ago level of 1,147 MMcf/d. The same from Utica Operations is expected to reach 2,127 MMcf/d from 1,654 MMcf/d in the June quarter of 2018.

Crude oil pipeline throughput is expected to rise to 2,585 thousand barrels per day (MBD) from the year-ago quarter’s 2,229 MBD. Product pipeline throughput is expected to grow marginally to 1,180 MBD. Total natural gas processed in the quarter is estimated at 7,835 MMcf/d, up from 5,404 MMcf/d in the prior-year period.

The above-mentioned positives will likely boost the partnership’s second-quarter results, partially offset by lower C2 + NGLs fractionated volumes from Southwest Operations, which are projected at 17 MBD, lower than the year-ago level of 19 MBD.

What Our Model Says

Our proven model does not conclusively show that MPLX is likely to beat the Zacks Consensus Estimate in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -1.34%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: MPLX currently carries a Zacks Rank #1. Though a Zacks Rank of 1 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks With Favorable Combination

Though an earnings beat looks uncertain for MPLX, here are a few firms from the energy space that you may want to consider on the basis of our model. These have the right combination of elements to post an earnings beat in the quarter to be reported.

Holly Energy Partners, L.P. HEP has an Earnings ESP of +1.18% and is a #2 Ranked player. The partnership is anticipated to release second-quarter 2019 earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enbridge Inc. ENB is set to report second-quarter 2019 earnings on Aug 2. The stock has an Earnings ESP of +6.70% and a Zacks Rank #3.

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Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
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