NuStar Energy L.P. (NS) Up 52% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for NuStar Energy L.P. (NS). Shares have added about 52% 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 catalysts.

NuStar Energy Q1 Earnings and Revenues Miss Estimates

NuStar Energy reported first-quarter adjusted earnings per unit of 39 cents, below the Zacks Consensus Estimate of 46 cents. The partnership’s bottom line was unfavorably impacted by a non-cash impairment of $225 million. However, NuStar’s earnings compared favorably with the year-ago loss of 6 cents on the back of increased Permian Basin volumes.

Meanwhile, NuStar Energy reported revenues of $392.8 million that missed the Zacks Consensus Estimate of $400 million but rose 12.9% year over year.

NuStar recorded an operating loss of $93.1 million compared to a profit of $73.6 million in the last year’s corresponding quarter. This downside could be attributed to non-cash impairment losses of $225 million associated with its Pipeline unit, which drove costs and expenses 77.2% higher to $485.9 million.

Segmental Performance

Pipeline: Total quarterly throughput volumes were 2,126,478 barrels per day (Bbl/d), up 39.7% from the year-ago period. Throughput volumes from crude oil pipelines jumped 50.4% from the year-ago quarter to 1,532,046 Bbl/d while throughput from refined product pipelines witnessed an increase to 594,432 Bbl/d from 503,485 Bbl/d. In particular, volume ramp up at NuStar’s Permian crude system lrd to the big bump in pipeline throughputs.  As a result, the segment’s revenues rose 25.2% year over year to $195.7 million. However, a $225 million impairment charge meant that the partnership’s Pipeline unit reported an operating loss of $122.9 million compared to operating income of $67.3 million in the year-ago period.

Storage: Throughput volumes soared to 678,830 Bbl/d from 364,854 Bbl/d in the prior-year quarter. The unit’s quarterly revenues increased to $123.2 million from $103.5 a year ago owing to surging throughput terminal revenues (from $21.7 million to $38.7 million). NuStar’s Storage segment benefited from a full quarter’s contribution from the new Taft 30-inch pipeline and other expansion projects. Consequently, the segment’s operating income came in at $48.6 million compared with $32.2 million in the corresponding quarter of 2019.

Fuels Marketing: Product sales decreased to $73.9 million from $88.1 million in the year-ago quarter. On a positive note, cost of goods dropped 21.7% from the prior-year period to $67 million. Moreover, NuStar delivered strong margins from its bunkering business and robust performance from its butane blending and transmix operations. The segment recorded earnings of $6.4 million in the quarter under review compared with $1.9 million in first-quarter 2019.

Cash Flow, Debt and Guidance

First-quarter 2020 distributable cash flow available to limited partners was $122.3 million (providing 2.80x distribution coverage), significantly higher than $67.4 million (1.04x) in the year-ago period. 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.

Taking into account the impact of the historic oil market crash and the coronavirus-induced demand destruction for the fuel, NuStar now anticipates 2020 adjusted EBITDA in the band of $665-735 million, around 6% lower at the midpoint of its previous guidance. The partnership also announced a cut to its 2020 capital spending plan by 45% from its prior projection, to a range of $165 to $195 million. NuStar expects distribution coverage ratio for the year to come in between 1.6x to 1.8x.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -29.67% due to these changes.

VGM Scores

At this time, NuStar Energy L.P. has a great Growth Score of A, though it is lagging a bit on the Momentum Score front 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.

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