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NuStar's (NS) Q2 Earnings Miss Estimates, Revenues Beat

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NuStar's (NS) Q2 Earnings Miss Estimates, Revenues Beat

NuStar's (NS) distributable cash flow available to limited partners in the second quarter surges 36% from the year-ago quarter.

NuStar Energy L.P. NS recently reported second-quarter 2018 earnings per limited partner unit of 15 cents, missing the Zacks Consensus Estimate of 21 cents due to a fall in Storage segment income caused by increased operating costs. However, the reported figure surged from the year-ago earnings of 5 cents per unit, due to higher contributions from the partnership’s Permian Crude System.

NuStar’s operating income was $79.8 million, up 8.8% from the prior-year quarter. Moreover, the partnership recorded a net income of $29.4 million in the quarter under review compared with $26.3 million in the year-ago quarter.

Quarterly revenues of $486.2 million surpassed the Zacks Consensus Estimate of $481 million. Moreover, the top line was higher than the year-ago level of $435.5 million, primarily due to increased revenues from pipeline and fuels marketing segments.

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Cash Flow

Per NuStar’s latest earnings release, distributable cash flow available to limited partners in the second quarter was $82.1 million (providing 1.28x distribution coverage), increasing more than 36% from $60.3 million (providing 0.59x distribution coverage) in the year-ago quarter.

Segmental Performance

Pipeline: Total quarterly throughput volumes in the segment were 1,405,314 barrels per day (Bbl/d), up 29% from the year-ago period. While throughput volumes in the crude oil pipelines jumped 50.4% (owing to higher contribution from Permian crude system) from the year-ago quarter to 839,574 Bbl/d, throughput from the refined product pipelines inched up from 531,529 Bbl/d in the year-ago period to 565,740 Bbl/d.

As a result, throughput and other revenues rose 18.6% year over year to $150.3 million. However, operating and depreciation expenses rose 21.2% and 14.6% year over year, respectively. Concurrently, the segment’s operating income of $63 million was up from the year-ago figure of $52.9 million.

Storage: Throughput volumes in the Storage segment fell 1.7% year over year to 331,917 Bbl/d. The unit’s quarterly revenues fell from $158.6 million in the second quarter of 2017 to $157.5 million in the quarter under review, due to a plunge in throughput terminal revenues (from 22.1 million in second-quarter 2017 to $20.1 million in second-quarter 2018). The segment's operating income also decreased 4.7% to come in at $21.2 in the reported quarter.

Fuels Marketing: Product sales and other revenues from this segment increased to $180.5 million from $153.9 million in the year-ago quarter. The unit reported operating earnings of $2.9 million, higher than the income of $289 thousands recorded in the prior-year quarter. The results were supported by 26.6% fall in operating expenses and the streamlining efforts that the partnership executed last year.

Balance Sheet

As of Jun 30, 2018, the partnership’s total debt was $3.4 billion, representing a debt-to-capitalization ratio of 54.9%.

Guidance

For the full year, the company’s EBITDA is expected in the range of $700-$750 million. Capital spending for 2018 is expected in the range of $360-$390 million. Of the spending plan, around $190 million is directed toward developing the Permian Crude System. The capital budget also includes $50 million for the projects related to supply of refined products to Mexico.

The company expects its 2018 distribution coverage ratio for the common units in the range of 1.2x-1.3x.

Zacks Rank & Other Key Picks

Currently, San Antonio, TX-based NuStar has a Zacks Rank #2 (Buy). Investors interested in the Energy sector can also opt for other top-ranked stocks like Canadian Natural Resources Limited CNQ, ConocoPhillips COP and Cheniere Energy, Inc. LNG, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 41.3% year over year, while its bottom line is expected to increase more than 200%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 14.1% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 27.6%.

Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 26% year over year, while its bottom line is expected to increase more than 225%.

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