NuStar Downgraded to Strong Sell - Analyst Blog


On Jun 5, Zacks Investment Research downgraded San Antonio-based publicly traded partnership NuStar Energy LP ( NS ) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

NuStar witnessed sharp downward estimate revisions after reporting disappointing first-quarter 2013 results. In fact, this leading master limited partnership (MLP) delivered negative earnings surprises in all the last 4 quarters with an average miss of 64.12%.

On Apr 24, 2013, NuStar announced weak first-quarter earnings, mainly due to lower contribution from the storage business. NuStar reported earnings per unit- from continuing operations - of 6 cents. The earnings were well below the Zacks Consensus Estimate of 45 cents and the year-ago profit from continuing operation of 39 cents.

Notably, NuStar's high debt level is a cause of concern, which leaves the partnership vulnerable to an extended downturn. As of Mar 31, 2013, NuStar had debt (including current portion) of $2.4 billion, representing a debt-to-capitalization ratio of around 49%.

Moreover, over the last few years, NuStar has consolidated its business through a combination of organic efforts and accretive acquisitions. We believe the higher operating expenses associated with this expanded asset base may lead to reduced returns going forward.

A combination of all these factors has weighed on the earnings estimates for NuStar in the last 60 days. The Zacks Consensus Estimate for the second quarter of 2013 has gone down by 21.1% to 41 cents per unit while it dropped 12.0% to $1.84 per unit for 2013.

Other Stocks to Consider

Not all MLPs in the energy sector are performing as poorly as NuStar. The stocks of Enbridge Energy Management LLC ( EEQ ), Enterprise Products Partners LP ( EPD ) and Summit Midstream Partners LP ( SMLP ) are worth considering. All these stocks carry a Zacks Rank #2 (Buy).

ENBRIDGE ENERGY (EEQ): Free Stock Analysis Report

ENTERPRISE PROD (EPD): Free Stock Analysis Report

NUSTAR ENERGY (NS): Free Stock Analysis Report

SUMMIT MIDSTRM (SMLP): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: EEQ , EPD , MLP , NS , SMLP

More from

Related Videos




Most Active by Volume

  • $15.755 ▼ 1.78%
  • $8.57 ▼ 6.03%
  • $129.90 ▼ 0.39%
  • $26.18 ▲ 1.12%
  • $6.635 ▲ 5.48%
  • $2.045 ▼ 1.68%
  • $79.55 ▼ 1.07%
  • $9.895 ▲ 7.20%
As of 2/27/2015, 11:36 AM

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by