On Oct 31, pipeline operator Magellan Midstream Partners LP (MMP) reported stellar third-quarter 2014 results owing to a significant rise in demand for refined products and robust performance by all its business segments. The stock has gained over 5% in the NYSE since the earnings release.
The Tulsa, OK-based oil distributor reported earnings per unit (EPU) of 71 cents (excluding mark-to-market commodity-related pricing adjustments), surpassing the Zacks Consensus Estimate of 66 cents. The reported earnings were not only higher than the year-ago quarter adjusted earnings of 54 cents but also the 62 cents guidance given by the partnership in August.
Total revenue of $521.6 million rose 17.5% year over year and also beat the Zacks Consensus Estimate of $473 million. Substantial improvement in transportation and terminal revenues benefited the performance.
Distributable Cash Flow
Magellan Midstream reported a record quarterly distributable cash flow of $183.4 million in third-quarter 2014, compared with $141.1 million a year ago.
Segmental Performance
Refined Products: Quarterly operating margin was $200.5 million, up 36.6% from the year-ago period. Higher transportation and terminal revenues stemming from an increase in shipment volumes, higher fees for storage and other services, and increased tariffs boosted the results.
Crude Oil: In this segment, operating margin was approximately $70.3 million, up nearly 39% from the prior-year quarter. An increase in transportation and terminal revenues resulting from higher shipment of crude oil through the Longhorn pipeline led to the improvement.
Marine Storage: This segment’s operating margin increased 12.7% year over year to $27.6 million. The rise primarily reflects the effect of a storage contract adjustment. Higher rate of storage also contributed to the result. This was offset by lower product margins.
Guidance
Magellan Midstream raised its full-year 2014 distributable cash flows estimate to $865 million from $840 million, based on strong financial results and a positive outlook for the remaining part of the year. The partnership expects to maintain its annual distribution growth target of 20% in 2014 and 15% in 2015.
The partnership projects fourth-quarter earnings at 92 cents per unit. It raised the full-year earnings guidance to $3.50 per unit from $3.30.
Saddlehorn Open Season Extension
Magellan Midstream announced that the recently declared Saddlehorn Pipeline open season has been extended to Nov 20. The extension comes with a new tariff structure. The partnership added that it has received binding commitments from affiliates of Anadarko Petroleum Corporation (APC) and Noble Energy, Inc (NBL) and is proceeding with the pipeline project based on these. However, it is open to receive commitments from all potential shippers.
Zacks Rank
Magellan Midstream currently carries a Zacks Rank #1 (Strong Buy).
Other Stock Picks
One could also consider other players from the industry like Delek Logistics Partners, LP (DKL), which sports a Zacks Rank #1.
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