NuStar Energy (NS) Q3 Earnings Lag, Sales Top Estimates

NuStar Energy L.P. NS reported third-quarter 2017 earnings per limited partner unit of 15 cents, missing the Zacks Consensus Estimate of 27 cents. Further, the bottom line was also significantly below the year-ago quarter profit of 49 cents. The owner and operator of crude oil and refined products pipelines and storage facilities’ bottom line suffered due to a light quarter from the Fuels Marketing unit along with higher interest and depreciation expenses.

NuStar’s operating income was $91.7 million, up 4.3% from the prior-year quarter. However, the net income of the partnership reduced by 24.5% to $38.6 million in the quarter under review primarily due to higher interest expenses.

Quarterly revenues of $440.6 million surpassed the Zacks Consensus Estimate of $376 million. However, the top line was a slightly lower than the year-ago level of $441.4 million.

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Quarterly Distribution

NuStar — whose general partner is NuStar GP Holdings LLC NSH — announced a quarterly distribution of $1.095 per unit ($4.38 per unit annualized) that remains unchanged from its previous-quarter distribution. The distribution is payable on Nov 14 to unitholders of record as on Nov 9, 2017.

Per NuStar’s latest earnings release, distributable cash flow available to limited partners for the third quarter was $67 million (providing 0.66x distribution coverage), compared with $87.6 million (providing 1.02x distribution coverage) in the year-ago quarter.

Segmental Performance

Pipeline: Total quarterly throughput volumes in the segment were 1,206,869 barrels per day (Bbl/d), up 31% from the year-ago period. While throughput volumes in the crude oil pipelines jumped 76.8% from the year-ago quarter to 679,721 Bbl/d, refined product pipelines throughput fell 1.7% to 527,148 Bbl/d. As a result, throughput revenues rose 12.2% year over year to $137.4 million.

Concurrently, the segment’s operating income — $61.1 million — was up 3.7% from the year-ago figure of $58.9 million.

Storage: Throughput volumes in the Storage segment plunged 63.6% year over year to 294,544 Bbl/d. Nevertheless, higher contribution from Permian Crude System and the Martin Terminal acquisition drove the unit’s quarterly revenues from $158.1 million in the third quarter of 2017 compared with $157.8 million in the prior-year quarter.

Moreover, the segment's operating income was $59.3 million compared with $58.4 million in the year-ago quarter.  Higher storage terminal values and lower operating expenses led to better results.

Fuels Marketing: The unit reported operating loss of $1.5 million, much wider than the loss of $337,000 incurred in third-quarter 2016. Results were hampered by 11.3% fall in revenues from product sales.

Costs & Expenses

The partnership — which counts Magellan Midstream partners L.P. MMP and Buckeye Partners L.P. BPL as its competitors among others — recorded total costs of $348.8 million, down 1.3% year-over-year. In particular, cost of product sales, general/administrative and operating expenses operating expenses reduced in the quarter, partly offset by increasing depreciation costs.  

Balance Sheet

As of Sep 30, 2017, NuStar had cash and cash equivalents of $33.6 million. The partnership’s total debt was $3,232.6 million, which represents a debt-to-capitalization ratio of 57.2%.

Stock Performance

Units of Zacks Rank #5 (Strong Sell) partnership have lost 13% during the third quarter compared with the 5.7% decline of the industry.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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