On Jun 5, Zacks Investment Research downgraded San
Antonio-based publicly traded partnership
NuStar Energy LP
) to a Zacks Rank #5 (Strong Sell).
ENBRIDGE ENERGY (EEQ): Free Stock Analysis
ENTERPRISE PROD (EPD): Free Stock Analysis
NUSTAR ENERGY (NS): Free Stock Analysis
SUMMIT MIDSTRM (SMLP): Free Stock Analysis
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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
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
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
Other Stocks to Consider
Not all MLPs in the energy sector are performing as poorly as
NuStar. The stocks of
Enbridge Energy Management LLC
Enterprise Products Partners LP
Summit Midstream Partners LP
) are worth considering. All these stocks carry a Zacks Rank #2