It has been about a month since the last earnings report for Plains All American Pipeline (PAA). Shares have lost about 5.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Plains All American due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Plains All American Q3 Earnings and Revenues Beat
Plains All American Pipeline, L.P. delivered third-quarter 2018 adjusted earnings of 43 cents per unit, beating the Zacks Consensus Estimate of 37 cents by 16.2%. Moreover, the bottom line soared 104.8% from 21 cents in the year-ago period.
In the quarter under review, the partnership reported GAAP earnings of 30 cents, in line with the year-earlier quarter's figure.
In the third quarter, the firm's total revenues grossed $8,792 million, surpassing the Zacks Consensus Estimate of $8,227 million by 6.9%.
Quarterly revenues surged 49.7% from $5,873 million in the prior-year period.
In the Transportation segment, adjusted EBITDA of $388 million increased 6.9% from the year-ago quarter's tally, courtesy of an expanded volume in Permian Basin systems coupled with benefits from the Diamond pipeline, which came online in late 2017. However, this upside was offset by the sale of assets in the Rocky Mountain and Central regions.
In the Facilities segment, adjusted EBITDA of $173 million declined 5% from the figure, registered a year ago. This downside was caused by the impact of asset sales.
The company reported adjusted EBITDA of $75 million in the Supply and Logistics segment against a loss of $56 million in the comparable period last year. This was primarily driven by favorable regional crude oil differentials, higher lease gathering margins and volumes plus benefits arising from an audit recovery in NGL businesses.
Highlights of the Release
In the quarter under review, Plains All American's total cost and expenses were $8,299 million, up 42.4% year over year from $5,829 million. This increase can be primarily attributed to increase in purchases and related costs coupled with field operating cost. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $636 million, surging 30.1% year over year.
Interest expenses declined 17.9% year over year to $110 million.
The partnership's operating income grew significantly to $493 million from $44 million in the prior-year quarter.
As of Sep 30, 2018, current assets were $4,127 million compared with $4,000 million as of Dec 31, 2017.
As of Sep 30, 2018, Plains All American had long-term debt of $9,140 million compared with $9,183 million as of Dec 31, 2017. The total long-term debt-to-total book capitalization ratio was 45%, down from 46% at the end of 2017.
Plains All American raised its full-year 2018 adjusted EBITDA outlook to $2,550 million.
Expected adjusted EBITDA in the Transportation, Facilities and Supply & Logistics segment is $1,510 million, $690 million and $350 million, respectively.
The firm expects its capital expenditure to be $1,950 million, up from $1,135 million invested in 2017.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 17.12% due to these changes.
At this time, Plains All American has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Plains All American has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.