Pipeline operator Magellan Midstream Partners L.P.MMP is set to release its first-quarter 2017 results before the opening bell on Wednesday, May 3.
In the preceding three-month period, the Tulsa, OK-based partnership reported better-than-expected earnings on the back of higher contributions from Magellan's core fee-based transportation and terminal activities.
Coming to earnings surprise history, Magellan Midstream has an excellent record: its beaten estimates in each of the last four quarters.
Let's see how things are shaping up for this announcement.
Magellan Midstream Partners L.P. Price and EPS Surprise
Factors to Consider This Quarter
Magellan Midstream owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee- and tariff-based revenues. This includes the longest U.S. refined petroleum products pipeline system, access to almost 50% of refining capacity in the continental U.S. along with imports, and 85 petroleum terminals with more than 90 million barrels of storage.
In particular, increasing cash flow from growth projects coming online, together with continued strong performance from Magellan Midstream's fee-based businesses will drive earnings.
However, higher operating expenses remain a concern. Moreover, Magellan Midstream's non-fee based assets continue to be under pressure due to weak crude prices. This may result in reduced earnings and revenues for the firm.
Our proven model does not conclusively show that Magellan Midstream will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -2.22%. This is because the Most Accurate estimate stands at 88 cents, while the Zacks Consensus Estimate is pegged higher, at 90 cents.
Zacks Rank: Magellan Midstream has a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
While earnings beat looks uncertain for Magellan Midstream, here are some energy firms you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter:
PBF Logistics L.P. PBFX has an Earnings ESP of +10.91% and a Zacks Rank #1. The partnership is expected to release earnings results on May 4. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Global Partners L.P. GLP has an Earnings ESP of +233.33% and a Zacks Rank #1. The partnership is anticipated to release earnings on May 9.
NOW Inc. DNOW has an Earnings ESP of +17.39% and a Zacks Rank #2. The company is likely to release earnings on May 3.
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