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NuStar (NS) Q2 Earnings Miss by a Whisker, Increase Y/Y

Zacks Equity Research

NuStar Energy L.P. NS reported second-quarter 2019 results on Aug 8, with earnings and sales lagging the Zacks Consensus Estimate. The partnership posted adjusted earnings per limited partner unit of 18 cents, a penny lower than the Zacks Consensus Estimate. Weaker-than-expected storage terminal volumes and lower-than-anticipated contribution from the Fuels Marketing unit can be attributed to the earnings miss.

Nonetheless, the bottom line grew from the year-ago earnings of 15 cents a unit on the back of solid operations from the Pipeline segment amid increased throughput volumes from crude oil pipelines.

Quarterly revenues of $372.4 million missed the Zacks Consensus Estimate of $502 million. The top line was also lower than the year-ago level of $389.3 million.

While the firm’s revenues declined y/y, NuStar’s operating income increased from $76.4 million to $93.3 million in the quarter under review. The higher operating income was driven by lower costs and expenses, which totaled $279.2 million compared with the year-ago level of $312.8 million. Notably, cost of product sales declined 28% from the prior-year quarter to $86.4 million.


NuStar Energy L.P. Price, Consensus and EPS Surprise


NuStar Energy L.P. Price, Consensus and EPS Surprise
NuStar Energy L.P. Price, Consensus and EPS Surprise

NuStar Energy L.P. price-consensus-eps-surprise-chart | NuStar Energy L.P. Quote

Segmental Performance

Pipeline: Total quarterly throughput volumes from the segment were 1,659,668 barrels per day (Bbl/d), up 18% from the year-ago period. While throughput volumes from crude oil pipelines jumped 30% (primarily owing to higher contribution from the Permian crude system) from the year-ago quarter to 1,089,848 Bbl/d, throughput from refined product pipelines witnessed a nominal increase to 569,820 Bbl/d from 565,740 Bbl/d. As a result, the segment’s revenues rose 14.8% year over year to $172.5 million. Concurrently, operating income of $78.7 million was up from the year-ago figure of $62.9 million.

Storage: Throughput volumes from the Storage segment rose to 395,512 Bbl/d from 331,917 Bbl/d in the prior-year quarter. The unit’s quarterly revenues fell to $110.4 million from $114.8 in the prior-year period, owing to a plunge in storage terminal revenues (from 94.6 million to $87.2 million). However, operating expenses of the firm decreased from $52.8 million in the year-ago quarter to $48.2 million. The segment’s operating income came in at $38.1 million versus $38.7 million in the corresponding quarter of 2018.

Fuels Marketing: Product sales from this segment decreased to $89.5 million from $124.3 million in the year-ago quarter. On a positive note, cost of goods and operating expenses declined 28.4% and 28% from the prior-year period to $85.8 million and $587,000, respectively.  The segment recorded earnings of $3.1 million in the quarter under review compared with $3.6 million in second-quarter 2018.

Cash Flow, Debt and Guidance

Second-quarter 2019 distributable cash flow available to limited partners was $89.8 million (providing 1.39x distribution coverage), higher than $82.1 million (providing 1.28x distribution coverage) in the year-ago period.

As of Jun 30, the partnership’s total debt was $3,466.5 million, representing a debt-to-capitalization ratio of 59%.

The partnership continues to expect full-year adjusted EBITDA in the band of $665-$715 million. Distribution coverage forecast for 2019 is expected in the range of 1.3-1.4 times. Reliability spending forecast for 2019 is now expected in the band of $60-$80 million versus prior projection within $70-$90 million.

Zacks Rank and Stocks to Consider

NuStar currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Delek Logistics Partners, L.P. DKL, Oasis Midstream Partners LP OMP and TC PipeLines, LP TCP. While Delek Logistics and Oasis Midstream sport a Zacks Rank #1 (Strong Buy), TC Pipelines carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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