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NuStar Energy L.P. (NS) Up 1.6% Since Last Earnings Report: Can It Continue?

·5-min read

A month has gone by since the last earnings report for NuStar Energy L.P. (NS). Shares have added about 1.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.

NuStar Energy Q1 Earnings & Sales Miss Estimates, Fall Y/Y

Oil pipeline operator NuStar Energyreported first-quarter adjusted earnings per unit of 5 cents, below the Zacks Consensus Estimate of 28 cents and lower than the year-ago income of 39 cents. The partnership’s bottom line was unfavorably impacted by lower volumes through its systems.

Meanwhile, NuStar Energy reported revenues of $361.6 million that missed the Zacks Consensus Estimate of sales of $385 million and fell 7.9% year over year.

NuStar recorded an operating income of $98.3 million against a loss of $93.1 million in the last year’s corresponding quarter. This upside could be attributed to non-cash impairment losses of $225 million associated with its Pipeline unit in the previous-year quarter, which drove costs and expenses significantly higher.

Segment Performance

Pipeline: Total quarterly throughput volumes were 1,610,053 barrels per day (Bbl/d), down 24.3% from the year-ago period and missed the Zacks Consensus Estimate of 1,679,738 Bbl/d. Throughput volumes from crude oil pipelines fell 28.1% to 1,101,327 Bbl/d while throughput from refined product pipelines witnessed a decrease to 508,726 Bbl/d from 594,432 Bbl/d. In particular, the negative impacts from the winter storm Uri and lower volumes in comparison to last year’s record levels led to the slump in pipeline throughputs. As a result, the segment’s revenues declined 13.5% year over year to $169.2 million. However, the absence of a $225 million impairment charge incurred in the first quarter of 2020 meant that the partnership’s Pipeline unit reported an operating profit of $79.4 million, turning around from the operating loss of $122.9 million in the year-ago period.

Storage: Throughput volumes dipped to 400,302 Bbl/d from 678,830 Bbl/d in the prior-year quarter and missed the Zacks Consensus Estimate of 400,699 Bbl/d. The unit’s quarterly revenues fell 11.9% year over year to $108.6 million owing to lower throughput terminal revenues (from $38.7 million to $24.8 million). NuStar’s Storage segment was dragged down by storm shut-ins and throughput declines on the partnership’s Corpus Christi crude system. Consequently, the segment’s operating income came in at $42.7 million compared with $48.6 million in the corresponding quarter of 2020.

Fuels Marketing: Product sales increased to $83.9 million from $73.9 million in the year-ago quarter. But on a bearish note, cost of goods rose 23.1% from the prior-year period to $82.4 million. Moreover, NuStar experienced weak margins from its bunkering business and tepid performance from its butane blending operations. The segment recorded earnings of $1.5 million in the quarter under review compared with $6.9 million in first-quarter 2020.

Cash Flow, Debt and Guidance

First-quarter 2021 distributable cash flow available to limited partners was $80.5 million (providing 1.84X distribution coverage), lower than $122.3 million (2.80X) in the year-ago period. Despite falling year over year, a coverage ratio far in excess of 1 implies that the partnership is generating more than enough cash in the period to cover its distribution.

As of Mar 31, the partnership’s total consolidated debt was $3.4 billion.

NuStar remains on track to generate 2021 EBITDA “comparable to 2020’s strong results, after taking into account our sale of the Texas City terminal in December of last year.” The partnership expects improving demand, utilization and price through the remainder of this year with a potential recovery on the horizon. Finally, NuStar looks well positioned to finance all of its 2021 spending of $140-$170 million from the internally generated cash flows.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.48% due to these changes.

VGM Scores

Currently, NuStar Energy L.P. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise NuStar Energy L.P. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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