Pipeline operator
Magellan Midstream Partners
,
L.P.
(
MMP
) announced earnings per unit (EPU) of 94 cents (excluding
mark-to-market commodity-related pricing adjustments), a penny
behind the Zacks Consensus Estimate of 95 cents and also below the
year-ago adjusted profit of $1.01, owing to weaker demands for
gasoline in the quarter.
However, total revenue of $493.5 million was up 11.4% year over
year and was also above the Zacks Consensus Estimate of $490.0
million, aided by good performance from its crude oil pipelines and
storage infrastructure.
Quarterly Distribution
Recently, Magellan raised its quarterly cash distribution by
3.0% sequentially and 9.0% year over year to 84 cents per unit
($3.36 per unit annualized). The partnership's new distribution is
payable on May 15 to unitholders of record as of May 8, 2012.
Segmental Performance
Petroleum Products Pipeline System
:
In the Petroleum Products Pipeline System, quarterly operating
margins (before affiliate G&A and D&A expenses) were $125.4
million, down 0.8% year over year as improved revenues were more
than offset by elevated expenses. Moreover, its higher volumes of
crude oil were more than mitigated by weak gasoline demand.
Petroleum Terminals
:
In the Petroleum Terminals segment, operating margin was a record
$48.0 million, up 20.4% year over year. The improvement were
attributable to the recently-constructed crude oil storage
facilities, new refined product tanks, inflated rates from its
marine terminals and decreasing operating expenses, partly offset
by a decline in product margin owing to less overseas sales.
Ammonia Pipeline System
:
The partnership's Ammonia Pipeline System reported an operating
margin of $3.9 million, higher than the $3.7 million earned in the
first quarter of 2011. The result was positively impacted by a
decrease in operating expenses, partly offset by declining
revenues.
2012 Guidance
Management has raised their distributable cash flow guidance by
$10 million to $490 million for the full year and is targeting
annual distribution growth of 9%.
The partnership plans to spend approximately $500 million on
expansion projects in 2012, with expenditures of $180 million
thereafter to complete these projects. Additionally, the
partnership is on the look out for more than $500 million worth
potential growth projects in the earlier stages of development.
Our Recommendation
Magellan Midstream units currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on the stock.
Magellan Midstream Partnersowns a high-quality and diverse
portfolio of midstream assets that generate stable and recurring
revenues by way of long-term fee-based contracts. The partnership -
with more than $500 million of potential projects under development
- has attractive growth potential, and maintains a sound liquidity
position.
The partnership is also susceptible to lower-than-expected
demand for refined products, commodity price fluctuations and cost
overruns on expansion projects.
Magellan Midstream competes in the 'Oil/Gas Production Pipeline
MLP' industry with firms like
Plains All American Pipeline, L.P.
(
PAA
),
Inergy Midstream LLC
(
NRGM
),
PAA Natural Gas Storage, L.P.
(
PNG
), etc.
MAGELLAN MDSTRM (MMP): Free Stock Analysis
Report
INERGY MIDSTRM (NRGM): Free Stock Analysis
Report
PLAINS ALL AMER (PAA): Free Stock Analysis
Report
PAA NATURAL GAS (PNG): Free Stock Analysis
Report
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