A month has gone by since the last earnings report for NuStar Energy L.P. (NS). Shares have added about 17.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NuStar Energy L.P. due for a pullback? 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.
NuStar Energy Misses on Q4 Earnings Estimates
NuStar Energyreported fourth-quarter adjusted earnings per unit of 13 cents, below the Zacks Consensus Estimate of 22 cents. The partnership’s bottom line also fell from the year-ago earnings of 40 cents per unit. Quarterly performance was affected by lower product sales and higher cost of goods.
However, the company reported total quarterly revenues of $387 million, beating the Zacks Consensus Estimate of $360 million, attributable to better-than-expected revenues from the Pipeline unit. Precisely, the partnership’s Pipeline unit generated revenues worth $180.8 million, surpassing the Zacks Consensus Estimate of $177 million. The top line, however, declined 3.25% year over year.
Also, the company recorded an operating income of $104.4 million, lower than the profit of $124.1 million in the corresponding quarter of last year.
Pipeline: Total quarterly throughput volumes were 1,657,310 barrels per day (Bbl/d), down 19.8% from the year-ago period. Throughput volumes from crude oil pipelines decreased 23.3% from the year-earlier quarter to 1,121,378 Bbl/d. Also, throughput from refined product pipelines witnessed a decrease to 535,932 Bbl/d from 601,505 Bbl/d. As a result, the segment’s revenues dipped 6.75% year over year to $180.8 million. Moreover, the firm’s Pipeline unit reported an operating income of $85.5 million compared with the operating income of $98.6 million in the year-ago period.
Storage: Throughput volumes descended to 387,149 Bbl/d from 656,000 Bbl/d in the prior-year quarter. However, the unit’s quarterly revenues increased to $129.4 million from $126.4 a year ago owing to surging storage terminal revenues (from $83.3 million to $92.9 million). Evidently, the segment’s operating income summed $49.1 million in the December quarter compared with $45.9 million in the comparable period last year.
Fuels Marketing: Product sales decreased to $76.5 million from $79.4 million in the year-ago quarter. Moreover, cost of goods rose 8.8% from the prior-year period to $63.2 million. However, NuStar Energy delivered weak margins from its bunkering business. The segment recorded an operating income of $2.5 million in the quarter under review compared with the profit of $11.2 million in fourth-quarter 2019.
Cash Flow, Debt and Guidance
Fourth-quarter 2020 adjusted distributable cash flow available to limited partners was $63.1 million, lower than $107.1 million in the year-ago period. Moreover, adjusted distribution coverage declined to 1.44X from 1.64X in the fourth quarter of 2019. A coverage ratio in excess of 1 implies that the partnership is generating more than enough cash to cover its distribution.
As of Dec 31, 2020, the partnership’s total consolidated debt was $3.6 billion.
For the current year, oil pipeline operator NuStar Energy anticipates its capital expenditure in the $140-$170 million band, all of which will be financed by internally generated cash flows. Of the total estimated capex, nearly $50 million will be allocated to its Permian system while another $50 million will be devoted to renewable fuels along with related improvements of its West Coast storage assets. Further, the company intends to spend around $40-$50 million on reliability capital spending.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, NuStar Energy L.P. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, NuStar Energy L.P. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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