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Why Is DCP Midstream Partners, LP (DCP) Up 9.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for DCP Midstream Partners, LP (DCP). Shares have added about 9.5% in that time frame, outperforming the S&P 500.

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

DCP Midstream Q4 Earnings Beat Estimates, Revenues Miss

DCP Midstream reported fourth-quarter 2021 adjusted earnings of 83 cents per unit, beating the Zacks Consensus Estimate of earnings of 79 cents. The bottom line increased from the year-ago quarter’s profit of 34 cents per unit.

Total quarterly revenues of $3,477 million missed the Zacks Consensus Estimate of $5,305 million. However, the top line increased from $1,785 million in the year-ago quarter.

The better-than-expected earnings were backed by increased wellhead volumes in the North and Midcontinent. The positives were partially offset by a decline in NGL pipelines throughput volumes as well as higher costs and expenses.

Operations

Logistics and Marketing

The segment recorded adjusted EBITDA of $161 million in the fourth quarter, down from the year-ago period’s $183 million. Lower NGL pipelines throughput volumes affected the segment. The negatives were partially offset by higher Sand Hills, Southern Hills and Front Range volumes.

The average NGL pipelines throughput for the quarter was 692 thousand barrels per day (Mbpd), higher than the year-ago quarter’s level of 610 Mbpd. Fractionator throughputs were recorded at 57 Mbpd, up from the year-ago quarter’s level of 54 Mbpd.

Gathering and Processing

The segment reported adjusted EBITDA of $237 million in the fourth quarter, up from $181 million in the year-ago quarter. Increased wellhead volumes in the North and Midcontinent and favorable commodity prices aided the segment. The positives were partially offset by lower South region volumes.

Average natural gas wellhead volumes for the quarter declined to 4,151 million cubic feet per day (MMcf/d) from the year-ago period’s 4,442 MMcf/d. NGL gross production totaled 417 Mbpd, up from the year-ago quarter’s level of 414 Mbpd.

Total Expenses

Purchases and related costs significantly increased year over year in the quarter under review. Operating and maintenance expenses rose to $177 million from $160 million in the fourth quarter of 2020.

Total operating costs and expenses in the fourth quarter were $3,225 million, up from the year-ago quarter’s figure of $1,740 million.

Financials

For fourth-quarter 2021, total expansion capital expenditures and equity investments were $16 million. Sustaining capital for the quarter was $23 million. DCP generated an excess free cash flow of $122 million in the reported quarter.

At the end of fourth-quarter 2021, the partnership reported long-term debt of $5,078 million. Cash and cash equivalents were $1 million. It had current debt of $355 million, reflecting a debt to capitalization of 48.2%.

Guidance

For 2022, DCP Midstream projects adjusted EBITDA in the range of $1,350-$1,500 million. It expects a distributable cash flow of $900-$1,010 million, while excess free cash flow is projected to be $425-$585 million.

The partnership anticipates sustaining capital expenditures of $100-$140 million for the year. Growth capital expenditure is anticipated to be $100-$150 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 6.37% due to these changes.

VGM Scores

At this time, DCP Midstream Partners, LP has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, DCP Midstream Partners, LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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