A month has gone by since the last earnings report for Magellan Midstream Partners (MMP). Shares have lost about 11.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Magellan Midstream due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Magellan Midstream Q4 Earnings Beat Estimates, Revenues Miss Mark
Magellan Midstream Partners reported fourth-quarter 2019 adjusted earnings per unit of $1.31, surpassing the Zacks Consensus Estimate of $1.18 and the year-ago quarter profit of $1.03. Strong contribution from Crude Oil and Refined Products unit aided the results.
Quarterly revenues of $656.6 million was lower than the year-ago level of $866 million and missed the Zacks Consensus Estimate of $852 million owing to lower contribution from product sales revenue.
Segmental Performance
Operating margin from the Refined Products segment was $264.9 million compared with $349.3 million in the year-ago quarter.
Magellan Midstream’s Crude Oil unit generated $151.3 million of operating margin in the quarter compared to $129.8 million for the same period in 2018.
For the Marine Storage division, operating margin was $32.9 million, 7.5% higher than the $30.6 million earned in the year-ago period.
DCF & Balance Sheet
Magellan Midstream reported that its distributable cash flow (DCF) for fourth-quarter 2019 came in at $357.8 million, up 18.32% from the year-ago quarter.
Notably, on Jan 21, the partnership announced fourth-quarter cash distribution of $1.02 per unit ($4.11 on an annualized basis), representing 3% and 1% annual and sequential growth, respectively. This represents the 71st distribution hike since the partnership became public.
As of Dec 31, the partnership had cash and cash equivalents of $58 million, and a long-term debt of $4.8 billion.
2020 Outlook
Management expects to generate distributable cash flows of approximately $1.2 billion for the full year and is targeting annual distribution growth of 3%. Magellan Midstream guided towards first-quarter and full-year earnings per unit of $1.08 and $4.30, respectively.
The partnership plans to spend $400 million to complete certain expansion projects in 2020. Additionally, Magellan Midstream continues to look out for more than $500 million of potential organic growth projects in the earlier stages of development.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -7.02% due to these changes.
VGM Scores
At this time, Magellan Midstream has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Magellan Midstream has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Magellan Midstream Partners, L.P. (MMP): Free Stock Analysis Report
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