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Magellan (MMP) Q2 Earnings and Sales Top Estimates, View Up

Zacks Equity Research

Magellan Midstream Partners L.P. MMP reported second-quarter 2019 adjusted earnings per unit of $1.20, surpassing the Zacks Consensus Estimate of $1.07 and the firm’s forecast of $1.13. Higher volumes from its crude oil pipelines led to the outperformance. Stronger contribution from Refined Products and Crude Oil units also aided the results. The bottom line was also higher than the year-ago profit of $1.05 a unit.

 

Quarterly revenues of $701.7 million topped the Zacks Consensus Estimate of $653 million. The top line was also higher than the year-ago level of $644.1 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-eps-surprise-chart | Magellan Midstream Partners, L.P. Quote

Segmental Performance     

 

Refined Products: Revenues from the segment came in at $490 million, up from $442.4 million recorded in the year-ago period. Notably, total volumes shipped in the quarter under review totaled 132.4 million barrels versus 133.9 million barrels a year ago. Operating margin from the segment increased to $224.1 million in second-quarter 2019 from $191.4 million in the corresponding period of 2018. While depreciation costs increased y/y, general & administration expenses decreased. Operating profit of the segment increased 24% y/y to $158.3 million.

 

Crude Oil: Quarterly revenues came in at $164.5 million, up 6% y/y on the back of higher volumes. Total volumes shipped in the quarter totaled 80.5 million barrels, up from 49.9 million barrels in the year-ago period. As such, operating margin increased to $160.3 million from $151.9 million recorded in the year-ago period. Operating profit came in at $130.4 million, up 3.6% y/y on the back of higher volumes and margins, partly offset by increased depreciation as well as G&A costs.

 

Marine Storage: Revenues from the segment came in at $48.6 million compared with the year-ago period’s $47.5 million. Operating margin increased 7% y/y to $30 million. However, higher depreciation and general & administration costs increased y/y. Resultantly, its operating profit declined to $11.9 million from $12.7 million in the year-ago period.

 

DCF & Balance Sheet

 

Distributable cash flow in second-quarter 2019 came in at $314.8 million, up from $266.6 million in the year-ago period.

 

Notably, on Jul 25, the partnership announced second-quarter cash distribution of $1.0125 per unit ($4.05 on an annualized basis), representing 6% and 1% annual and sequential growth, respectively. This represents the 69th distribution hike since the partnership became public. The new distribution will be paid on Aug 14 to unitholders of record as of Aug 7.

 

As of Jun 30, the partnership had cash and cash equivalents of $3.1 million, and a long-term debt of $4,407.8 million (with a debt-to-capital ratio of 62.6%).

 

Guidance Up

 

For full-year 2019, management now expects to generate distributable cash flow of approximately $1.22 billion, up from the prior forecast of $1.18 billion. Also, it is targeting annual distribution growth of 5%. Magellan projects second-quarter earnings per unit to be $1.03. Projection for full-year earnings per unit has been revised upward to $4.20 from the previous guidance of $4.05. The partnership plans to spend approximately $1.1 billion on expansion projects in 2019.

 

Zacks Rank and Key Picks

 

Magellan currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space include Delek Logistics Partners, L.P. DKL, BP Midstream Partners LP BPMP and TC PipeLines, LP TCP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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