Pipeline operator Magellan Midstream Partners L.P. (MMP) is set to release its second quarter 2014 results before the opening bell on Tuesday, Aug 5.
In the preceding three-month period, Magellan Midstream delivered a positive 57.4% earnings surprise – the third outperformance in the last 4 quarters – fueled by a combination of higher rates and an increase in transportation volumes. Robust performance by all the segments also supported the results.
Factors to Consider This Quarter
The operating scenario for pipeline operators will remain critical in the near to medium term. Magellan is also susceptible to lower-than-expected demand for refined products, commodity price fluctuations and cost overruns on expansion projects.
Moreover, depressed commodity margins and high maintenance capital expenditure may adversely affect the partnership’s earnings and cash flows.
Earnings Whispers?
Our proven model does not conclusively show that Magellan Midstream is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: Magellan Midstream’s earnings ESP is 0.00%, as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 71 cents.
Zacks Rank: Magellan Midstream carries a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
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 an earnings beat this quarter:
Mid-Con Energy Partners L.P. (MCEP) has an Earnings ESP of +9.09% and holds a Zacks Rank #2 (Buy).
Cimarex Energy Co. (XEC) has an Earnings ESP of +0.58% and holds a Zacks Rank #2.
Crescent Point Energy Corp. (CPG) has an Earnings ESP of +28.21% and holds a Zacks Rank #2 (Buy).
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