It has been about a month since the last earnings report for NuStar Energy L.P. (NS). Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NuStar Energy L.P. 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 catalysts.
NuStar Q2 Earnings Miss Narrowly, Up Y/Y
NuStar Energy's second-quarter 2019 earnings and sales lagged the Zacks Consensus Estimates. 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
At this time, NuStar Energy L.P. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
NuStar Energy L.P. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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