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MPLX Q4 Earnings: Key Factors to Know Ahead of the Release

Nilanjan Choudhury

MPLX LP MPLX is scheduled to release fourth-quarter 2018 results before the opening bell on Thursday, Feb 7. The current Zacks Consensus Estimate for the quarter under review is a profit of 68 cents per unit on revenues of $1.8 billion.

In the preceding three-month period, the Findlay, OH-based energy midstream service provider beat the consensus mark by 6.9% as higher pipeline fees boosted Logistics & Storage segment results.

As far as earnings surprises are concerned, the oil and gas logistics operator has a mixed record, having gone past the Zacks Consensus Estimate twice in the last four reports. This is depicted in the graph below:

MPLX LP Price and EPS Surprise

 

MPLX LP Price and EPS Surprise | MPLX LP Quote

Investors are keeping their fingers crossed and hoping that the partnership can surpass earnings estimate this time around.

Let’s delve deeper and find out the factors impacting the results.

Factors to Consider This Quarter

MPLX’s business is centered around its Logistics & Storage (L&S) segment. Mainly involved in storing and transporting crude oil, the L&S unit makes up around 70% of the partnership’s profits and is seen as a source of stable cash flow. The Zacks Consensus Estimate for operating income at MPLX’s largest segment in the fourth quarter of 2018 is $543 million, up significantly from $205 million a year earlier and $468 million in the previous quarter. Rising pipeline tariffs on oil and gas transported through the partnership’s assets is likely to account for the upbeat sentiment.

The partnership’s Gathering & Processing (G&P) business – primarily focused on the Marcellus and Utica Shales – is also expected to deliver solid results thanks to increasing throughput volumes. Consequently, the Zacks Consensus Estimate for fourth-quarter segment operating income is pegged at $419 million, more than doubling from $204 million reported in the previous quarter and up 15% year over year. 

However, MPLX’s interest costs and capital expenditures are on rise. In the third quarter of 2018, the partnership’s interest expenses increased around 70%, while capital outlay was up by more than $120 million over the same period. The partnership’s profit levels can be hurt if the trend continues.

What Does Our Model Say?

Our proven model too does not conclusively predict that MPLX will beat the Zacks Consensus Estimate this quarter. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -4.69%.

Zacks Rank: MPLX currently has a Zacks Rank of 3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.

Note that we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

While earnings beat looks uncertain for MPLX, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:

Buckeye Partners, L.P. BPL has an Earnings ESP of +0.76% and a Zacks Rank #3. The partnership is anticipated to release earnings on Feb 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Phillips 66 PSX has an Earnings ESP of +7.80% and a Zacks Rank #3. The company is slated to release earnings on Feb 8.

Patterson-UTI Energy, Inc. PTEN has an Earnings ESP of +0.22% and a Zacks Rank #3. The company is anticipated to release earnings on Feb 7.

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