Why Is SemGroup (SEMG) Up 1.4% Since Last Earnings Report?

It has been about a month since the last earnings report for SemGroup (SEMG). Shares have added about 1.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is SemGroup 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.

SemGroup Q1 Loss Wider Than Expected, Sales Down Y/Y

SemGroup Corporation reported adjusted loss of 18 cents per share in first-quarter 2019, much wider than the Zacks Consensus Estimate of a loss of a penny. The underperformance was attributed to weaker-than-expected contribution from U.S. Gas and Canada units. Precisely, profits from U.S. Gas and Canada units came in at $12.2 million and 22.7 million, lagging the Zacks Consensus Estimate of $15.8 million and $25.5 million, respectively.

However, the reported loss was narrower than the year-ago loss of 35 cents a share, primarily on the back of higher y/y contribution from its biggest segment, U.S. Liquids.

Total revenues recorded in the quarter came in at $567.2 million, surpassing the Zacks Consensus Estimate of $553 million. However, the top line declined from the prior-year sales of $661.6 million.

Segmental Information

U.S. Liquids: This segment — which includes operations of SemGroup U.S. Crude Transportation, Crude Facilities, and Storage Operation, Crude Supply & Logistics and HFOTCO — recorded a profit of $89.5 million, reflecting a rise of 31.4% from the year-ago quarter. White Cliffs pipeline volumes of 147 thousand barrels per day (Mbbl/d) were notably higher than the year-ago figure of 107Mbbl/d. Additionally, margin gains and higher utilization from Cushing and Houston storage terminals drove the segment’s results.

U.S. Gas: Profit generated from this segment (the erstwhile SemGas unit) amounted to $12.2 million, lower than $14.3 million income recorded a year ago amid reduced average processing volumes and drilling activities.

Canada: This unit includes the results of SemGroup’s legacy SemCAMS segment plus Meritage assets.

The segment’s profit in the quarter under review totaled $22.7 million compared with $22.1 million incurred in the corresponding quarter of the last year. The improvement can be attributed to higher average gas processing volumes on the back of incremental contribution from new plants namely, Patterson Creek and Wapiti.

Balance Sheet & Guidance

As of Mar 31, the company had a long-term debt of around $2.5 billion. Its debt-to-capitalization ratio was 54%.

SemGroup reaffirmed its guidance for 2019. The firm expects full-year 2019 net capital outlay of $307 million that includes $45 million associated with maintenance projects. Further, the company projects adjusted EBITDA for the year in the $420-$465 million range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, SemGroup has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

SemGroup has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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