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Why Is NuStar Energy L.P. (NS) Up 3% Since Last Earnings Report?

A month has gone by since the last earnings report for NuStar Energy L.P. (NS). Shares have added about 3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NuStar Energy L.P. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

NuStar Q1 Earnings Miss, Sales Up Y/Y

NuStar posted adjusted earnings per limited partner unit of 14 cents, significantly missing the Zacks Consensus Estimate of 32 cents due to massive impairment charges that spiked total costs in the quarter under review by 90.6% on a year-over-year basis. The bottom line also deteriorated from the year-ago earnings of 33 cents a unit.

NuStar incurred an operating loss of $233.1 against an income of $98.5 million in the prior-year quarter, owing to an increase in total costs. Total costs and expenses amounted to $719.6 million compared with the year-ago level of $377.4 million. Asset and goodwill impairment charges incurred in the quarter under review hit the company hard, as is evident fromits net loss of $277.8 million against earnings of $126.1 million in the year-ago period.

Quarterly revenues of $486.5 million missed the Zacks Consensus Estimate of $488 million. However, the top line was higher than the year-ago level of $475.8 million. The outperformance can be attributed to increased throughput volumes from crude oil pipelines.

Segmental Performance

Pipeline: Total quarterly throughput volumes from the segment were 1,522,093 barrels per day (Bbl/d), up 15% from the year-ago period. While throughput volumes from crude oil pipelines jumped 29% (primarily owing to higher contribution from the Permian crude system) from the year-ago quarter to 959,041 Bbl/d, throughput from refined product pipelines scaled down from 531,894 Bbl/d in the year-ago period to 503,485 Bbl/d. As a result, the segment’s revenues rose 14.2% year over year to $156.3 million. Concurrently, operating income of $67.3 million was up from the year-ago figure of $57.8 million.

Storage: Throughput volumes from the Storage segment rose to 364,854Bbl/d from 343,933Bbl/d in the prior-year quarter. The unit’s quarterly revenues fell to $143 million from $155.3 in the prior-year period, owing to a plunge in storage terminal revenues (from 135.3 million in first-quarter 2018 to $121.3 million). The segment’s results were majorly hit by huge asset impairment charges of $297.3 million. Operating and depreciation costs recorded an increase from the year-ago quarter. As a result, the segment slipped to an operatingloss of $247.2 in the quarter under review versus the year-ago profit of $56.3 million.

Fuels Marketing: Product sales and other revenues from this segment increased to $189 million from $186 million in the year-ago quarter. Operating costs skyrocketed 430.7% year over year to $4.4 million. Further, the segment bore the brunt of goodwill impairment charges of $31.1 million. Consequently, the segment recorded a loss of $25 million in the quarter under review against a profit of $6.3 million in first-quarter 2018.

Cash Flow &Balance Sheet

First-quarter 2019 distributable cash flow available to limited partners was $95 million (providing 1.47x distribution coverage), higher than $91.7 million (providing 1.64x distribution coverage) in the year-ago period.

As of Mar 31, the partnership’s cash and cash equivalents came in at $15.8 million. Total debt was $3,333.2 million, representing a debt-to-capitalization ratio of 57.6%.

2019 Guidance Reiterated

The partnership continues to expect full-year adjusted EBITDA in the band of $665-$715 million. Distribution coverage forecast for 2019 is also maintained in the range of 1.2-1.3 times. Moreover, capital expenditure budget remains unchanged at $500-550 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, NuStar Energy L.P. has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NuStar Energy L.P. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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