The massive decline in oil prices forced many companies to become more efficient, and cost conscious in order to stay afloat. These cost cutting measures included decreased capital expenditures and improving efficiency. Now, as oil prices have begun to stabilize just below the $50 level, companies that were successful in reigning in costs are starting to see benefits from the cost cutting measures and improved oil prices simultaneously come together. This is why Rose Rock Midstream (RRMS) is the Zacks Bull of the Day.
This Zacks Ranked #1 (Strong Buy) company owns, operates, develops and acquires a diversified portfolio of midstream energy assets. The Company is engaged in the business of crude oil gathering, transportation, storage and marketing in Colorado, Kansas, Montana, North Dakota, Oklahoma and Texas. Rose Rock Midstream, L.P. is based in Tulsa, Oklahoma.
In their most recent earnings report, the company saw year over year gains in adjusted gross margin +17.1%, net income +81.5%, and adjusted EBITDA +16%. Management also produced a distributable cash flow of $35.3 million in the first quarter 2016. This caused management to raise their quarterly cash distribution by +4% to $0.66 per unit.
According to Carlin Conner, CEO, “Rose Rock's first quarter results were right in line with expectations and highlight the benefits of our fee-based business model and our continued focus on efficient execution. We've maintained our solid financial performance and continue to execute in a cost effective manner, positioning Rose Rock to successfully navigate these challenging market conditions.”
As you can see from the graph below, the company suffered during the oil downturn, but their stock price shot up after their most recent earnings report.
Increasing Estimates
Due to their strong Q1 earnings, and the rebound in oil prices, earnings estimates for Q2 16, Q3 16, FY 16 and FY 17 have all seen significant upgrades over the past 60 days. Q2 16 improved from $0.22 to $0.31, Q3 16 rose from $0.21 to $0.31, FY 16 jumped up from $0.78 to $1.32, and FY 17 improved from $0.56 to $0.84.
Bottom Line
Rose Rock’s commitment to efficiency has begun to pay off, and this coupled with the stabilization of oil prices near the $50 level have benefited the company overall. Also, the company’s Isabel pipeline, that transports crude oil from Kansas to Cushing OK, just came online in March, and about 80% of the company’s distribution is tax deferred. Therefore, 2016 should be a very profitable year for Rose Rock Midstream.
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ROSE ROCK MIDST (RRMS): Free Stock Analysis Report
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