NuStar: Likely to Beat Earnings - Analyst Blog

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We expect publicly traded partnership, NuStar Energy LP ( NS ) to beat expectations when the partnership reports its first-quarter 2013 results before the opening bell on Apr 24, 2013.

Why a Likely Positive Surprise?

Our proven model shows that NuStar is likely to beat earnings because it has the right combination of two key factors.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method ), which represents the difference between the Most Accurate estimate of 48 cents and the Zacks Consensus Estimate of 45 cents, stands at +6.67%. This is a meaningful and leading indicator of a likely positive earnings surprise for units.

Zacks Rank #2 (Buy): The stocks with Zacks Rank of #1 (Strong buy), #2 (Buy) and #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered while going into an earnings announcement.

The combination of NuStar's Zacks Rank #2 (Buy) and +6.67% ESP makes us very confident in looking for a positive earnings beat on Apr 24, 2013.

What is Driving the Better-than-Expected Earnings?

NuStar - that was spun off from the U.S. refiner Valero Energy Corp. ( VLO ) in 2006 - boasts a diversified asset base and robust distribution-growth prospects. A strong pipeline of organic growth projects and contribution from acquisitions provide the partnership with an above peer-group average-distribution-coverage ratio.

Moreover, NuStar has a track record for consistent distribution growth - its current quarterly distribution of $1.095 per unit ($4.38 per unit annualized) is up approximately 120% over its distribution rate at the time of its IPO in 2001.

In addition, the partnership has consolidated its business through a combination of organic efforts and accretive acquisitions over the last few years. NuStar's recently formed asphalt joint-venture partnership with a private investment firm is also a welcome move, aimed at reducing the pipeline operator's unpredictability about its future cash flows, while trimming the requirement for large working capital investment.

Based on the success of the partnership's operations - particularly in the booming Eagle Ford shale region - the Zacks Consensus Estimate for the first quarter of 2013 has increased by 4.7% to 45 cents per unit, over the last 30 days. Moreover, the first-quarter 2013 Zacks Consensus Estimate of 45 cents per unit represents earnings per unit growth of a whopping 80% over the last quarter.

Other Stocks to Consider

Here are some other firms you may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

EPL Oil & Gas Inc. ( EPL ) has an earnings ESP of +12.50% and a Zacks Rank #1 (Strong Buy).

Stone Energy Corp. ( SGY ) has an earnings ESP of +2.86% and a Zacks Rank #1 (Strong Buy).

EPL OIL&GAS INC (EPL): Free Stock Analysis Report

NUSTAR ENERGY (NS): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

VALERO ENERGY (VLO): Free Stock Analysis Report

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Zacks Investment Research

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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