Magellan Midstream (MMP) Beats on Q3 Earnings and Sales

Magellan Midstream Partners L.P. MMP delivered a comprehensive beat in the third-quarter earnings season, on the back of stellar show from its refined products and crude oil units, along with reduced expenses.

Magellan Midstream posted adjusted earnings per unit of $1.10, surpassing the Zacks Consensus Estimate of $1.02. Further, the bottom line surged from the year-ago profit of 87 cents/unit. The pipeline operator’s revenues of $638 million also surpassed the Zacks Consensus Estimate of $611 million. The top line also increased 11.3% from the third quarter of 2017.

Importantly, Magellan Midstream’s distributable cash flow (DCF) in third-quarter 2018 came in at $281.8 million, up 19.8% from the year-ago quarter.

Magellan Midstream Partners, L.P. Price, Consensus and EPS Surprise

Magellan Midstream Partners, L.P. Price, Consensus and EPS Surprise | Magellan Midstream Partners, L.P. Quote

Segmental Analysis

Refined products: Robust demand for refined products drove transportation and terminals revenues to $300 million in the quarter, up from the prior-year figure of $289 million. Operating expenses were down around $6 million to a total of $112.3 million in the quarter under review. Product margin increased 512% on a year-over-year basis to stand at $23 million, primarily on the back of higher product sales revenues. Operating margin from the Refined Products segment was $214.7 million compared with $173.8 million in the year-ago quarter.

Crude Oil: Increased shipments on the Longhorn pipeline drove transportation and terminal revenues to $145 million, reflecting a 25% increase from the year-ago level of $116.3 million. While operating expenses increased 45% to amount to $45.2 million, product margin turned around from the year-ago loss to stand at $1 million, on the back of lower cost of product sales. The segment’s operating margin increased 33% year over year to come in at $153.8 million in the quarter under review.

Marine Storage: Higher average storage rates led to increased transportation and terminals revenues, which came in at $44 million in the quarter. Operating margin also recorded year-over-year growth of 12% to stand at $29 million, on the back of higher sales and lower operating expenses.

2018 Guidance Raised

Driven by robust third-quarter results, management now expects to generate record distributable cash flow of approximately $1.2 billion for the full year, up from the prior guidance of $1.1 billion. Magellan Midstream now expects its fourth-quarter earnings per unit of $1.24. Full-year diluted net earnings per unit are now projected to be $5.70 vis a vis the previous guidance of $4.10.

Zacks Rank and Key Picks

Magellan Midstream currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector can opt for some better-ranked stocks like Bonanza Creek Energy, Inc. BCEI, Hess Corporation HES and Murphy Oil Corporation MUR. While Bonanza Creek and Hess sport a Zacks Rank #1 (Strong Buy), Murphy Oil carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bonanza Creek delivered average positive earnings surprise of 12.93% in the last four reported quarters.

Hess pulled off average positive earnings surprise of 230.48% in the trailing four reported quarters.

Murphy Oil recorded a positive earnings surprise in each of the trailing four quarters, with average beat of 76.16%.

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