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Magellan Midstream Beats Earnings, Lags Rev - Analyst Blog

Posted
8/2/2013 4:00:00 PM
By: Zacks.com
Referenced Stocks:DKL;EPU;MMP;PSE;RRMS

Pipeline operator Magellan Midstream Partners LP ( MMP ) announced better-than-expected second-quarter 2013 earnings, on the back of strong activities from transportation and terminal operations.

The Tulsa, Oklahoma-based oil distributor reported earnings per unit (EPU) of 65 cents (excluding mark-to-market commodity-related pricing adjustments), surpassing the Zacks Consensus Estimate of 53 cents and the prior-year quarter adjusted profit of 51 cents.

Total revenue of $443.9 million was down slightly (by 1.3%) year over year and also fell short of the Zacks Consensus Estimate of $452.0 million. Substantial fall in revenue from product sales hurt the results.

Stock Split

In mid-Oct 2012, Magellan Midstream completed the split of its limited partner units in the 2:1 ratio. The quarterly results reflect the effects of the stock split.

Quarterly Distribution & Distributable cash flow

Magellan Midstream informed that distributable cash flow during this reported quarter increased by 26% to $168.2 million as compared to the year ago period.

Recently, Magellan Midstream raised its second-quarter 2013 cash distribution by 5% sequentially and 13% year over year to 53.25 cents per unit ($2.13 per unit annualized). Magellan Midstream's new distribution is payable on Aug 14 to unitholders of record as on Aug 7, 2013.

Segmental Performance

Refined Products: In this segment, quarterly operating profits (before affiliate G&A and D&A expenses) were recorded at $177.8 million, slightly higher than that of the year ago period. The 3.3% increase in transportation volumes favored this quarter's result.

Crude Oil: In this segment, operating margin was $40.5 million, up significantly by 78.1% year over year due to increased crude oil transportation volumes and rates.

Marine Storage: This segment's operating margin increased 38.1% year over year to $32.9 million, due to significant decrease in operating expenses partially offset by lower utilization level.

Guidance Raised

Management at Magellan Midstream hiked its expected distributable cash flows for full-year 2013 by $50.0 million to $630.0 million. The partnership also announced increased annual distribution growth target of 16% and 15% for the year 2013 and 2014 respectively. Magellan guided toward third quarter and full-year 2013 earnings per unit of 48 cents and $2.50, respectively.

Magellan Midstream maintained its plans to spend approximately $900 million on growth projects in 2013, with expenditures of an additional $320 million in 2014 to complete the projects. Moreover, the partnership will continue to put in more than $500 million in potential growth projects.

Zacks Rating

Magellan Midstream currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next 1 to 3 months.

In addition to Magellan Midstream, there are other pipeline operators that are expected to perform well in the next three months. These include Delek Logistics Partners LP ( DKL ), Pioneer Southwest Energy Partners LP ( PSE ) and Rose Rock Midstream LP ( RRMS ). All the stocks carry a Zacks Rank #2 (Buy).



DELEK LOGISTICS (DKL): Free Stock Analysis Report

MAGELLAN MDSTRM (MMP): Free Stock Analysis Report

PIONEER SW EGY (PSE): Free Stock Analysis Report

ROSE ROCK MIDST (RRMS): Free Stock Analysis Report

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