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Key Factors to Watch Out for Ahead of MPLX's Q1 Earnings

Zacks Equity Research

MPLX LP MPLX is scheduled to release first-quarter 2019 results before the opening bell on May 8.

In the preceding three-month period, the Findlay, OH-based energy midstream service provider missed the Zacks Consensus Estimate by 23.5%. 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 reports, with average positive surprise of 6.3%. This is depicted in the graph below:

MPLX LP Price and EPS Surprise

MPLX LP Price and 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 of 59 cents for first-quarter earnings has seen no upward but two downward revisions by firms in the past 30 days. This figure indicates a year-over-year decline of 3.3%.

The Zacks Consensus Estimate for revenues is pegged at $1.7 billion for the to-be-reported quarter, indicating a rise of 16.7% from the year-ago reported figure.

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 large-cap partnership, which owns, operates and develops midstream energy infrastructures and logistics assets, mostly for its parent company Marathon Petroleum Corporation.

The Zacks Consensus Estimate for Gathering and Processing segment’s first-quarter 2019 operating income is $539 million, higher than year-ago reported figure of $350 million. The Zacks Consensus Estimate for total gathering throughput is pegged at 5,050 million cubic feet per day (MMcf/d), higher than 4,171 MMcf/d in the year-ago quarter. Total natural gas processed in the quarter is estimated at 7,614 MMcf/d, higher than the year-ago level of 6,629 MMcf/d. However, natural gas processed from Utica operations is estimated at 874 MMcf/d, much lower than the year-ago period’s 936 MMcf/d.

In the Logistics and Storage segment, total pipelines throughput is estimated at 3,814 thousand barrels per day (MBPD), up from the year-ago level of 3,062 MBPD. The Zacks Consensus Estimate for C2 + NGLs fractionated from Utica operations is pegged at 40 MBPD, lower than 43 MBPD in the year-ago quarter.

In conclusion, the Gathering and Processing segment is expected to get a boost from total gathering throughput in the to-be-reported quarter. However, lower natural gas processing from Utica operations can partially offset the same. Although the Logistics and Storage segment will be positively impacted by total pipelines throughput in the quarter, weakness in Utica operations can play a spoilsport.

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

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -6.78%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: MPLX’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call.

As it is, we caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks WithFavorable 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.

Frisco, TX-based Comstock Resources, Inc. CRK has a Zacks Rank #2 and an Earnings ESP of +11.95%. The company is scheduled to report quarterly earnings on May 9.

Oklahoma City, OK-based Chaparral Energy, Inc. CHAP has a Zacks Rank #2 and an Earnings ESP of +110.00%. The company is set to report first-quarter earnings on May 9.

Calgary, Canada-based Canadian Natural Resources Limited CNQ has a Zacks Rank #3 and an Earnings ESP of +0.85%. The company is slated to report first-quarter earnings on May 9.

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Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
 
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