Magellan Midstream Beats Earnings, Lags Rev - Analyst Blog

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

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

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