Magellan Midstream Partners, L.P. MMP is anticipated to beat expectations when it reports second-quarter 2018 results on Aug 2 before the opening bell.
In the preceding three-month period, the company delivered a positive earnings surprise of 4% on the back of strong contribution from the Crude Oil operating segment. Further, the company surpassed the Zacks Consensus Estimate twice in the last four reported quarters.
Let’s see how things are shaping up for this announcement.
Magellan Midstream Partners, L.P. Price and EPS Surprise
Magellan Midstream Partners, L.P. Price and EPS Surprise | Magellan Midstream Partners, L.P. Quote
Earnings Whispers
Our proven model shows that Magellan Midstream is likely to beat earnings estimates in the to-be-reported quarter because it has the right combination of two key ingredients.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, stands at +2.80%. This is a very meaningful and leading indicator of a likely positive earnings surprise for shares. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Currently, Magellan Midstream carries a Zacks Rank #3 (Hold), which when combined with +2.80% ESP makes us confident about an earnings beat.
Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement. You can see the complete list of today’s Zacks #1 Rank stocks here.
Which Way are Estimates Treading?
Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts expect from the company this earnings season.
The Zacks Consensus Estimate for second-quarter earnings of $1 has witnessed two upward revisions and no downward revision by firms in the past 30 days. It reflects an improvement of about 8.7% from the year-ago quarter.
Further, the Zacks Consensus Estimate for second-quarter revenues is pegged at $618.1 million.
Factors at Play
Magellan Midstream owns an attractive portfolio of energy infrastructure assets that generate stable and recurring fee- and tariff-based revenues. The company is currently operating in an environment wherein a lack of midstream infrastructure is creating bottlenecks. Its asset base includes the longest U.S. refined petroleum products pipeline system, with access to almost 50% of the refining capacity in the continental United States, along with more than 100 million barrels of storage. The partnership’s 2,200 miles of oil pipeline faces high demand from clients, with rising production from onshore activities in the United States.
The partnership’s strong asset base is likely to increase the visibility of its above-average growth potential beyond 2018. In particular, increasing cash flow from online growth projects along with continued strong performance from Magellan Midstream’s fee-based businesses will drive earnings. Throughput levels from important pipeline projects including Longhorn, Saddlehorn and Bridge Tex pipelines, among others, are expected to ramp up, which are likely to buoy the company's results in the quarter under review.
The partnership recently announced a cash distribution of 95.75 cents per unit ($3.83 per unit annualized), representing about 2% sequential increase. This has raised optimism about its quarterly performance this season.
Other Energy Stocks With Favorable Combination
Here are some other companies from the same sector, which according to our model have the right combination of elements to post an earnings beat in the to-be-reported quarter.
Calgary, Canada-based Canadian Natural Resources Limited CNQ sports a Zacks Rank #1 and has an Earnings ESP of +1.75%. The company is scheduled to report second-quarter earnings on Aug 2.
Plano, TX-based Denbury Resources Inc. DNR has a Zacks Rank #2 and an Earnings ESP of +27.78%. The company will report second-quarter earnings on Aug 8.
Dallas, TX-based Holly Energy Partners, L.P. HEP carries a Zacks Rank #2 and has an Earnings ESP of +1.82%. The company is anticipated to report quarterly results on Aug 1.
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