Magellan Midstream Misses Q2 Earnings Estimates, Guides Up - Analyst Blog

Pipeline operator Magellan Midstream Partners LP ( MMP ) reported weak second-quarter 2014 results owing to a significant rise in operating expenses.

Following Magellan Midstream's earnings release, the stock lost $1.71 or 2.1% to close at $80.06 on Aug 5. In the after-hours trading session, the partnership's shares further fell by about 1.3% to $79.00.

The Tulsa, OK-based oil distributor reported earnings per unit (EPU) of 70 cents (excluding mark-to-market commodity-related pricing adjustments), which missed the Zacks Consensus Estimate by a penny. The reported earnings were also lower than the 72 cents guidance given by the partnership in May. The decline was a result of a non-cash impairment charge.

However, the bottom line improved from the year-ago quarter level of 65 cents per share owing to strong results from the Crude Oil segment.

Magellan Midstream Partners, Lp - Earnings Surprise | FindTheBest

Total revenue of $496.5 million rose 11.8% year over year but failed to meet the Zacks Consensus Estimate of $502 million.

Distributable Cash Flow

Magellan Midstream reported a record quarterly distributable cash flow of $195.9 million in second-quarter 2014, compared with $168.2 million in the prior-year quarter.

Segmental Performance

Refined Products: Quarterly operating margin was $162.7 million, down 8.5% from the year-ago period due to a considerable increase in operating expenses. However, this was partly offset by higher transportation and terminal revenues stemming from an increase in shipment volumes.

Crude Oil: In this segment, operating margin was approximately $73.5 million, significantly higher (up 81.5%) than the prior-year quarter. An increase in transportation and terminal revenues resulting from higher shipment of crude oil through the Longhorn pipeline led to the improvement.

Marine Storage: This segment's operating margin decreased 16.6% year over year to $27.4 million due to lower product sales and significantly higher operating expenses.


Magellan Midstream raised its full-year 2014 distributable cash flows estimate to $840 million from $810 million, based on strong financial results and a positive outlook for the remaining part of the year. The partnership anticipates annual distribution to grow by 20% in 2014 and 15% in 2015.

Magellan Midstream projects third-quarter earnings at 62 cents per unit. The partnership raised the full-year earnings guidance to $3.30 per unit from $3.25.

Zacks Rank & Other Stock Picks

Magellan Midstream currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players from the industry such as Atlas Pipeline Partners, L.P. ( APL ), Kinder Morgan Management LLC ( KMR ) and Plains All American Pipeline, L.P. ( PAA ). All these stocks have a Zacks Rank #2 (Buy).

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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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