What's in the Cards for DCP Midstream's (DCP) Q4 Earnings?
DCP Midstream, LP DCP is set to report fourth-quarter 2020 results on Feb 10, after the closing bell.
In the last reported quarter, the partnership generated earnings of 46 cents per unit, which beat the Zacks Consensus Estimate of 35 cents on the back of lower operating costs and expenses. Notably, both the operating segments managed to generate massive profits during the September quarter. This was partially offset by a decrease in profits from Guadalupe and lower NGL marketing profits.
The partnership beat the Zacks Consensus Estimate in three of the prior four quarters but missed the same on another occasion, delivering an average earnings surprise of 13.6%. This is depicted in the graph below:
DCP Midstream Partners, LP Price and EPS Surprise
DCP Midstream Partners, LP price-eps-surprise | DCP Midstream Partners, LP Quote
Let’s see how things have shaped up prior to the announcement.
Trend in Estimate Revision
The Zacks Consensus Estimate for fourth-quarter earnings of 50 cents per unit has seen two upward revisions and one downward movement in the past 60 days. The figure suggests a year-over-year increase of 35.1%.
Further, the Zacks Consensus Estimate for revenues is pegged at $2.5 billion for the quarter, indicating a rise of 28.2% from the year-ago reported figure.
Factors Driving Fourth-Quarter Earnings
DCP Midstream’s business model is designed to earn stable fee-based revenues from key midstream assets that are being utilized by shippers and customers over a long period. Therefore, it is likely to have been relatively less exposed to coronavirus-induced oil and gas price volatility in the fourth quarter.
Importantly, the Zacks Consensus Estimate for fourth-quarter NGL pipelines throughput is pegged at 668.3 thousand barrels per day (MBbls/d), indicating a rise from the year-ago figure of 599 MBbls/d. This potential increase is expected to have boosted the bottom line in the fourth quarter. Moreover, DCP Midstream’s cost-reduction efforts are likely to have supported December quarter profits, which are likely to have exceeded the year-ago level.
However, the Zacks Consensus Estimate for fourth-quarter natural gas wellhead in the Gathering and Processing segment is pegged at 4,345 million cubic feet per day (MMcf/d), indicating a decline from 4,998 MMcf/d in the year-ago period. The potential decline might have partially offset the positives in the quarter under review, making prediction of an earnings beat difficult.
What the Quantitative Model Suggests
Our proven model does not conclusively predict an earnings beat for DCP Midstream this time around. 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. That is not the case here as you will see below.
Earnings ESP: DCP Midstream has an Earnings ESP of -10.55%. This is because the Most Accurate Estimate for the quarter is currently pegged at 45 cents, lower than the Zacks Consensus Estimate of 50 cents per unit. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: DCP Midstream currently carries a Zacks Rank #1.
Stocks That Warrant a Look
Here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:
Diamondback Energy, Inc. FANG has an Earnings ESP of +8.58% and a Zacks Rank #2, currently. The company is scheduled to release quarterly earnings on Feb 22. You can see the complete list of today’s Zacks #1 Rank stocks here.
Plains All American Pipeline, L.P. PAA has an Earnings ESP of +22.18% and is a Zacks #3 Ranked player. The company is scheduled to release fourth-quarter results on Feb 9.
Continental Resources, Inc. CLR has an Earnings ESP of +17.97% and a Zacks Rank of 2. It is scheduled to report fourth-quarter results on Feb 16.
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