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Magellan Midstream (MMP) Q1 Earnings and Sales Top Estimates

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Magellan Midstream Partners, L.P. MMP stock has been stable since the company’s first-quarter 2021 earnings announcement on Apr 29.Despite this industry player’s impressive earnings and revenue results, and a solid Distributable Cash Flow (DCF) guidance for 2021, the partnership’s units failed to display significant growth.

Behind the Earnings Headlines

Magellan Midstream reported first-quarter 2021 adjusted earnings per unit of $1.09, beating the Zacks Consensus Estimate of 87 cents. The better-than-anticipated earnings are attributable to reduced expenses and healthy production margins owing to a more favorable pricing environment.

However, the bottom line fell 14.8% from the year-ago profit of $1.28 due to weak crude oil transportation and terminal revenues induced by lower average tariff rates and less volume shipped.

Meanwhile, quarterly revenues of $661 million outpaced the Zacks Consensus Estimate of $653 million but the top line lagged the year-ago sales of $783 million.

Segmental Performance

Refined Products: Revenues of $513.75 million were down from the year-ago period’s $628.9 million.Notably, total volumes shipped in the quarter under review were 118.1 million barrels, comparing unfavorably with 119.8 million barrels a year ago and the Zacks Consensus Estimate of 128 million barrels. The numbers reflect the lingering effects of coronavirus and inclement weather events. Operating margin from the segment declined to $273.6 million in the first quarter from $305.8 million in the corresponding period of 2020. However, it came above the Zacks Consensus Estimate of $245 million on cost efficiencies.

Crude Oil: Quarterly revenues grossed $149.1 million, down 4.1% year over year due to lower volumes shipped and softness in average tariff rates. Total volumes shipped in the quarter were 46.5 million barrels, down from 75.1 million barrels a year ago and also lower than the Zacks Consensus Estimate of 61 million. Operating margin contracted to $109 million from $119.9 million in the prior year and also fell below the Zacks Consensus Estimate of $117 million.

Magellan Midstream Partners, L.P. Price, Consensus and EPS Surprise

Magellan Midstream Partners, L.P. Price, Consensus and EPS Surprise
Magellan Midstream Partners, L.P. Price, Consensus and EPS Surprise

Magellan Midstream Partners, L.P. price-consensus-eps-surprise-chart | Magellan Midstream Partners, L.P. Quote

DCF & Balance Sheet

Magellan Midstream’s distributable cash flow (DCF) for the first quarter summed $276.5 million, dropping 9.8% from the year-ago level.

Notably, on Apr 22, the firm announced first-quarter cash distribution of $1.0275 per unit ($4.11 on an annualized basis). The amount is payable May 14 to its unitholders of record as of May 7.

As of Mar 31, 2020, the firm had cash and cash equivalents worth $13.03 million, and a long-term debt of $5 billion.

Magellan Midstream presently has $473 million under its $750-million repurchase program, which is set to expire in 2022.

2021 Outlook

As a result of the partnership's strong financial results for the first quarter and a more favorable product pricing climate for its gas liquids blending operations, management raised its annual DCF outlook by $50 million to $1.07 billion.

For the full year, free cash flow (FCF) is expected to be $1.27 billion or $350 million after distributions, which contains proceeds from the recent sale of a partial stake in the Pasadena marine terminal joint venture.

Based on the success of projects currently underway, Magellan Midstream plans to invest $75 million in 2021 and $15 million in 2022 to complete its current slate of expansion capital projects.

Zacks Rank & Key Picks

Magellan Midstream currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Whiting Petroleum Corporation WLL, Matador Resources Company MTDR and Continental Resources, Inc. CLR, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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