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Will a Likely Q1 Earnings Beat Drive Magellan (MMP) Stock?

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We expect Magellan Midstream Partners LPMMP to beat expectations when it reports first-quarter 2016 results before the opening bell on Wednesday, May 4. Whether the likely beat drives the stock will be interesting to watch.

In the preceding three-month period, the Tulsa, OK-based oil distributor and pipeline operator delivered a negative earnings surprise of 2.27%. However, the average earnings surprise for the last four quarters is positive 3.90%.

Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Magellan Midstream is likely to beat on earnings in the to-be-reported quarter because it has the right combination of two key ingredients.

Zacks ESP:Earnings ESP for this fuel transporter stands at +1.24%. This is because the Most Accurate estimate stands at 82 cents, whereas the Zacks Consensus Estimate is pegged a penny lower. A favorable Zacks ESP serves as a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: Magellan Midstream carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. The combination of a favorable Zacks Rank with a positive ESP makes us confident of an earnings beat.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

What's Driving the Better-Than-Expected Earnings?

Magellan Midstream owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee and tariff-based revenues. Moreover, lucrative acquisitions and organic growth projects have made major contributions toward Magellan's development. Factors like these should have a positive impact on the upcoming earnings.

Moreover, low oil cost resulted in higher refining activities. This is because the input cost is less for refiners. Moreover, the increased need for storage and transportation of refined petroleum products might help the likes of Magellan Midstream.

Other Stocks to Consider

Magellan Midstream is not the only partnership looking up this earnings season. Here are some players from the energy space which, according to our model, also have the right combination of elements to post an earnings beat this quarter.

Enable Midstream Partners, LP ENBL with an Earnings ESP of +21.05% and a Zacks Rank #2 (Buy).

Hercules Offshore, Inc. HERO has an Earnings ESP of +15.24% and a Zacks Rank #2.

DCP Midstream Partners LP DPM with an Earnings ESP of +9.52% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MAGELLAN MDSTRM (MMP): Free Stock Analysis Report

ENABLE MIDSTRM (ENBL): Free Stock Analysis Report

HERCULES OFFSHR (HERO): Free Stock Analysis Report

DCP MIDSTREAM (DPM): 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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