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Shares of NuStar Energy L.P. NS have gained 5.4% since second-quarter 2021 earnings announcement on Aug 5.
Despite this industry player’s earnings miss, the firm's shares rose on a strong business performance and higher throughput volumes as well as a more hopeful sustained rebound in refined product demand in the United States and Mexico for the remainder of 2021.
Behind the Earnings Headlines
Oil pipeline operator NuStar reported second-quarter adjusted earnings per unit of 25 cents, below the Zacks Consensus Estimate of 33 cents. The partnership’s bottom line was unfavorably impacted by the increased cost of goods.
However, the bottom line was higher than the year-ago income of 6 cents, attributable to a solid revenue contribution from the pipeline segment. Segmental revenues came in at $192.9 million, surpassing the Zacks Consensus Estimate of $185 million.
NuStar’s revenues of $427 million outpaced the Zacks Consensus Estimate of $388 million but fell 25.6% year over year.
It recorded an operating income of $115.6 million, higher than $92.7 million in the year-ago corresponding quarter. This upside could be attributed to outperformance throughout its key strategic asset portfolio, which includes refined products systems, crude assets and the West Coast Renewable Fuels Network.
Pipeline: Total quarterly throughput volumes were 1,851,188 barrels per day (Bbl/d), up 22.1% from the year-ago period’s level and also above the Zacks Consensus Estimate of 1,709,693Bbl/d. Throughput volumes from crude oil pipelines rose 17% to 1,244,215Bbl/d while throughput from refined product pipelines witnessed an increase to 606,973Bbl/d from 452,678Bbl/d.
NuStar's Permian Crude System throughput volumes also improved considerably from the sequential quarter’s level. Additionally, increasing demand recovered throughput levels in the partnership's Central West, East and North pipeline networks.
As a result, the segment’s revenues increased 16.1% year over year to $192.9 million. The partnership’s Pipeline unit reported an operating profit of $96.5 million, up from the profit of $72 million in the year-ago period.
Storage: Throughput volumes rose to 385,790Bbl/d from 348,189Bbl/d in the prior-year quarter. However, the same missed the Zacks Consensus Estimate of 402,304Bbl/d. The unit’s quarterly revenues marginally fell year over year to $119.3 million due to lower storage terminal revenues (from $87.2 million to $84.1 million).
The segment’s operating income came in at $46.2 million compared with $43.2 million in the corresponding quarter of 2020, attributable to improved volumes at several of its Central West throughput ports as a result of the pandemic recovery as well as continued robust contributions from its West Coast renewable fuels network.
Fuels Marketing: Product sales increased to $114.9 million from $54 million in the year-ago quarter. However, cost of goods rose 123.8% from the prior-year period to $112.1 million.
NuStar experienced weak margins from its bunkering business and a tepid performance from its butane blending operations as well. The segment recorded earnings of $2.3 million in the quarter under review compared with $3.3 million in second-quarter 2020.
NuStar Energy L.P. Price, Consensus and EPS Surprise
NuStar Energy L.P. price-consensus-eps-surprise-chart | NuStar Energy L.P. Quote
Cash Flow, Debt and Guidance
Second-quarter 2021 distributable cash flow available to limited partners was $97.4 million (providing 2.22X distribution coverage), higher than $62.5 million (1.43X) 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 quarter to cover its distribution.
As of Jun 30, the firm’s total consolidated debt was $3.5 billion.
As vaccination efforts continue, NuStar expects to see a sustained improvement in refined product demand in the United States and Mexico, and it anticipates refined product systems to function at roughly 100% of the pre-pandemic run-rate for the rest of 2021.
NuStar's Permian volumes increased to 481,000 barrels per day, on average, in July and the partnership is on track to end 2021 with about 500,000 barrels per day.
Zacks Rank & Stocks to Consider
NuStar currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Devon Energy Corporation DVN, Matador Resources Company MTDR and Continental Resources, Inc. CLR, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Devon Energy Corporation (DVN) : Free Stock Analysis Report
NuStar Energy L.P. (NS) : Free Stock Analysis Report
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