Earnings Preview: Magellan Midstream - Analyst Blog
February 04 2013 - 1:20PM
Zacks
Oil pipeline and storage partnership Magellan Midstream
Partners L.P. (MMP) is set to release its fourth-quarter
2012 results before the opening bell tomorrow, Tuesday, Feb 5.
In the preceding quarter, Magellan delivered a negative 20.45%
earnings surprise, pulled down by poor contribution from all its
business units. Let’s see how things are shaping up prior to this
announcement.
Factors to Consider This Quarter
The operating scenario for pipeline operators will remain
critical in the near to medium term. Magellan is also susceptible
to lower-than-expected demand for refined products, commodity price
fluctuations and cost overruns on expansion projects.
Moreover, depressed commodity margins and high maintenance
capital expenditure may adversely affect the partnership’s earnings
and cash flows.
In fact, the Zacks Consensus Estimate for the fourth quarter has
moved down by 4 cents to 65 cents per unit over the last 30 days as
the tendency for a downward estimate revision was more obvious.
Earnings Whispers
Our proven model does not conclusively show that Magellan
Midstream is likely to beat the Zacks Consensus Estimate in the
fourth quarter. That is because a stock needs to have both a
positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method)
and a Zacks Rank #1 (Strong Buy) or at least Zacks Rank #2 (Buy) or
Zacks Rank #3 (Hold) for this to happen. Unfortunately this is not
the case here as elaborated below.
Negative Zacks ESP: This is because the Most
Accurate estimate stands at 60 cents, while the Zacks Consensus is
higher at 65 cents. This results in a difference of -7.69%.
Zacks Rank #3 (Hold): Magellan Midstream’s
Zacks Rank #3 (Hold), however, increases the predictive power of
ESP. That said, we also need to have a positive ESP to be confident
of an earnings surprise call.
Other Stocks to Consider
Here are some other firms you may want to consider on the basis
of our model, which shows that they have the right combination of
elements to post an earnings beat this quarter:
Northern Tier Energy L.P. (NTI), Earnings ESP
of +7.97% and Zacks Rank #1 (Strong Buy).
Hercules Offshore Inc. (HERO), Earnings ESP of
+14.29% and Zacks Rank #2 (Buy).
Sunoco Logistics L.P. (SXL), Earnings ESP of
+7.69% and Zacks Rank #2 (Strong).
HERCULES OFFSHR (HERO): Free Stock Analysis Report
MAGELLAN MDSTRM (MMP): Free Stock Analysis Report
NORTHERN TIER (NTI): Free Stock Analysis Report
SUNOCO LOGISTIC (SXL): Free Stock Analysis Report
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