A month has gone by since the last earnings report for SemGroup (SEMG). Shares have lost about 18.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is SemGroup due for a breakout? 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.
SemGroup Q2 Loss Narrower Than Expected, Sales Beat
SemGroup Corporation reported adjusted loss of 18 cents per share in second-quarter 2019, narrower than the Zacks Consensus Estimate of a loss of 20 cents. The outperformance was attributed to robust contribution from its biggest segment, U.S. Liquids.
However, the reported loss compares unfavorably with the year-ago profit of 12 cents a share, on weaker-than-expected contribution from U.S. Gas and Canada units. Precisely, profits from U.S. Gas and Canada units came in at $11 million and 29.7 million, lagging the Zacks Consensus Estimate of $14.2 million and $32.1 million, respectively.
Total revenues recorded in the quarter came in at $674.9 million, surpassing the Zacks Consensus Estimate of $574 million. Moreover, the top line improved from the prior-year sales of $595.8 million.
U.S. Liquids: This segment — which includes operations of SemGroup U.S. Crude Transportation, Crude Facilities, and Storage Operation, Crude Supply & Logistics and HFOTCO — recorded a profit of $85.2 million, reflecting a rise of 6% from the year-ago quarter. White Cliffs pipeline volumes of 106 thousand barrels per day (Mbbl/d) were notably lower than the year-ago figure of 135Mbbl/d, this was more than offset by improved marketing margins.
U.S. Gas: Profit generated from this segment (the erstwhile SemGas unit) amounted to $11 million, lower than $15.4 million income recorded a year ago amid reduced NGL prices.
Canada: This unit includes the results of SemGroup’s legacy SemCAMS segment plus Meritage assets. The segment’s profit in the quarter under review totaled $29.7 million compared with $21.4 million incurred in the corresponding quarter of the last year. The improvement can be attributed to higher average gas processing volumes on the back of incremental contribution from new plants namely, Patterson Creek and Wapiti.
Balance Sheet & Guidance
As of Jun 30, the company had a long-term debt of around $2.5 billion. Its debt-to-capitalization ratio was 54.3%.
SemGroup reaffirmed its guidance for 2019. The firm expects full-year 2019 net capital outlay of $307 million that includes $45 million associated with maintenance projects. Further, the company projects adjusted EBITDA for the year in the $420-$465 million range.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -9.26% due to these changes.
Currently, SemGroup has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, SemGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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