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Plains All American (PAA) Down 1.3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Plains All American Pipeline (PAA). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Plains All American due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Plains All American Q2 Earnings Miss, Revenues Beat

Plains All American Pipeline, L.P. reported second-quarter 2021 adjusted earnings of 23 cents per unit, which lagged the Zacks Consensus Estimate by a penny. The bottom line also declined 8% from the year-ago figure.

For the quarter under review, the partnership reported GAAP loss of 37 cents per unit against earnings of 13 cents in the year-ago period.

Total Revenues

Total revenues of $9,930 million surpassed the Zacks Consensus Estimate of $7,595 million by 30.7%. Further, the top line improved 207.9% from $3,225 million reported a year ago.

Highlights of the Release

For the quarter under review, Plains All American’s total costs and expenses were $10,166 million, up 237.1% year over year. This increase was owing to higher purchases and related costs.

Total adjusted EBTIDA for the quarter was $579 million, up 10.5% from the year-ago period.

During the quarter, the Transportation segment’s total volumes were 6,248 thousand barrels per day (Mbls/d) compared with 5,914 Mbls/d in the prior-year period.

Net interest expenses decreased 0.9% year over year to $107 million.

Segmental Performance

In the Transportation segment, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $433 million increased 25.1% from the year-ago figure, primarily due to lower tariff volumes in multiple areas served driven by the impact of excess pipeline capacity in most regions of the country.

In the Facilities segment, adjusted EBITDA summed $140 million, down 19.5% from the year-ago figure. This fall was primarily due to the impact of asset sales and reduced NGL intersegment fee structure based on market conditions.

The Supply and Logistics segment reported adjusted EBITDA of $5 million against ($8) million in second-quarter 2020.

Financial Update

As of Jun 30, 2021, current assets were $5,676 million compared with $3,665 million at 2020-end.

As of Jun 30, 2021, Plains All American had a long-term debt of $8,389 million compared with $9,382 million on Dec 31, 2020.

As of the same date, its long-term debt-to-total book capitalization was 47%, down from 49% at 2020-end.

Guidance

Plains All American expects 2021 adjusted net income to be 96 cents per unit. The partnership’s 2021 adjusted EBITDA expectation is $2,175 million.

Plains All American expects average daily volumes in Transportation and Supply and Logistics segments to be 6,050 Mbls/d and 1,400 Mbls/d, respectively.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Plains All American has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Plains All American has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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