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Magellan (MMP) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Magellan Midstream Partners, L.P. MMPis set to report third-quarter 2019 results on Thursday Oct 31, before the opening bell.

The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of $1.08 on revenues of $678.8 million.

Let’s delve into the factors that might have influenced the partnership’s performance in the September quarter.

Factors at Play

Revenues from Magellan Midstream’s Refined Products segment came in at $490 million in the second quarter, up from $442.4 million recorded in the year-ago period, a trend that most likely continued in the third quarter because of a 4.3% tariff hike in July.

With fee-based, low risk activities comprising 85% of Magellan Midstream’s operating margin, the transporter of gasoline and diesel fuel is less susceptible to volatile commodity prices. This is expected to have driven the firm’s performance in the third quarter.

However, Magellan Midstream’s spate of project cancellations is a cause for concern. After the cancellation of its Texas-based Wink-to-Crane pipeline and the shutdown of its ammonia pipeline, the firm also backed out from developing the Permian-Gulf Coast pipeline. As this partnership scrapped a number of projects, investors are worried that the headwinds might reflect on Magellan Midstream’s third-quarter cash flows.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Magellan Midstream this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But this is not the case here.

Earnings ESP: Magellan Midstream has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Magellan Midstream currently has a Zacks Rank #3 (Hold).

Highlights of Q2 Earnings & Surprise History:

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

Moreover, quarterly revenues of $701.7 million topped the Zacks Consensus Estimate of $653 million. Further, the top line was higher than the year-ago level of $644.1 million.

As far as earnings surprises are concerned, this Tusla-based partnership’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 3.70%. This is depicted in the graph below:

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

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

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

Stocks to Consider

While earnings beat looks uncertain for Magellan Midstream, here are some companies from the energy space worth considering on the basis of our model, which shows that these have the right combination of elements to beat on earnings in the upcoming quarterly reports:

Concho Resources Inc. CXO has an Earnings ESP of +1.91% and a Zacks Rank #3. This independent oil and gas explorer and producer is scheduled to release earnings on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gulfport Energy Corporation GPOR has an Earnings ESP of +3.57% and a Zacks Rank of 3. This Oklahoma-based company engaged in the acquisition, exploration, development and production of oil and natural gas properties in the United States is scheduled to release earnings on Oct 31.

Cheniere Energy, Inc. LNG has an Earnings ESP of +11.77% and is a #3 Ranked stock. This Houston-based energy company is scheduled to release earnings on Nov1.

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