We expect EQT Midstream Partners LP (EQM) to beat expectations when it reports third-quarter 2014results on Oct 23. Last quarter, the midstream energy player delivered a positive earnings surprise of 3.85%. We note that the partnership has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 13.57%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that EQT Midstream Partnersis likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +9.41%. This is a meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: EQT Midstream Partners carries a Zacks Rank #2 (Buy) which, when combined with +9.41% ESP, makes us confident about an earnings beat.
Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings. Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
What's Driving the Better-Than-Expected Earnings?
EQT Midstream Partners’ midstream properties, which provide long-term fee-based revenue, are situated in the high growth Marcellus shale area. The partnership’s interstate pipeline system, which is spread over roughly 700 miles, connects to multiple distribution firms. The total throughput capacity of the partnership’s transmission assets – backed by 14 related natural gas storage reservoirs − is 2.25 trillion British units per day.
The partnership also has good capital structure and strong financial flexibility as reflected in its significantly low long-term debt.
Other Stocks to Consider
Other stocks in the energy sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Tallgrass Energy Partners LP (TEP), Earnings ESP of +6.67% and Zacks Rank #1 (Strong Buy).
Delek Logistics Partners LP (DKL), Earnings ESP of +5.56% and Zacks Rank #1.
Boardwalk Pipeline Partners LP (BWP), Earnings ESP of +9.09% and Zacks Rank #2.
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