NuStar (NS) Stock Barely Moves Since Q3 Earnings Announcement
The stock of oil pipeline operator NuStar Energy L.P. NS has hardly moved since its third-quarter 2022 results were announced on Nov 3. The muted response, despite the overall robust results, could be attributed to the throughput and revenue misses in its ‘Storage’ segment.
What Did NuStar’s Earnings Unveil?
NuStar Energy reported third-quarter adjusted earnings per unit of 20 cents, which matched the Zacks Consensus Estimate and improved from the year-ago income of 16 cents. The partnership’s bottom line was buoyed by the strong performance of its “Pipeline” segment.
Moreover, NuStar Energy’s revenues of $413.2 million beat the consensus mark of $374 million and edged up 0.2% year over year. This was primarily on account of all-time high Permian volumes, which averaged 580,000 daily during the quarter.
NuStar recorded an operating income of $111.9 million, reversing the loss of $79.2 million in the last year’s corresponding quarter. This upside could be attributed to the presence of impairment losses in the year-ago quarter.
Segment Performance
Pipeline: Total quarterly throughput volumes were 1,895,538 barrels per day (Bbl/d), down 4% from the year-ago period. Throughput volumes from crude oil pipelines fell 2.9% to 1,335,336 Bbl/d, while throughput from refined product pipelines decreased to 560,202 Bbl/d from 599,423 Bbl/d.
However, a record-breaking quarter from its Permian Crude System led to a 6.5% rise in the segment’s revenues to $209 million and surpassed the consensus mark of $207 million. Moreover, operating profit of $110.4 million surged 174.5% year over year in the absence of last year’s impairment loss.
Storage: Throughput volumes fell to 439,239 Bbl/d from 462,094 Bbl/d in the prior-year quarter and also missed the Zacks Consensus Estimate of 480,578 Bbl/d. The unit’s quarterly revenues decreased 27.5% year over year to $78.4 and underperformed the Zacks Consensus Estimate by 20.2% as storage terminal sales declined 33.5%.
However, the segment reported an operating income of $22.6 million, turning around the third-quarter 2021 loss of $91.9 million. The favorable comparison could be attributed to lower operating expenses and the absence of an impairment loss.
Fuels Marketing: Product sales increased to $125.8 million from $108 million in the year-ago quarter. Notwithstanding a 9.7% uptick in the cost of goods, the segment recorded earnings of $8.5 million, which surged from $949,000 a year ago, primarily due to higher fuel margins.
Cash Flow, & Debt
Third-quarter 2022 distributable cash flow available to limited partners was $93.5 million (providing 2.12X distribution coverage), higher than $92.1 million (2.10X) in the year-ago period. In addition to rising year over year, the 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 Sep 30, the partnership’s long-term debt was $3.1 billion. NuStar continues to improve its debt-to-EBITDA ratio, after bringing it down below 3.80 in the third quarter.
Guidance
NuStar expects to spend $105-$125 million on capital projects this year ($60 million on the Permian system), while maintenance expenditure is pegged between $30 million and $40 million. The partnership expects Permian Crude System volumes to exit 2022 at an average of 600,000 barrels per day – well above the record 580,000 achieved during the July-September period and 15% higher than last year.
Net income and adjusted EBITA guidance are expected in the range of $193-$206 million and $700-$730 million, respectively. Finally, the partnership wants to focus on the identified areas of cost control to lessen the effect of inflation and strengthen the free cash flow position.
Zacks Rank & Energy Picks
NuStar currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked players in the Oil/Gas sector are HF Sinclair DINO, Helmerich & Payne HP and Halliburton HAL, each carrying a Zacks Rank #1 (Strong Buy), currently.
You can see the complete list of today’s Zacks #1 Rank stocks here.
HF Sinclair: HF Sinclair is valued at some $12.6 billion. The Zacks Consensus Estimate for DINO’s 2022 earnings has been revised 11.7% upward over the past 60 days.
HF Sinclair, headquartered in Dallas, TX, delivered a 9.1% beat in Q3. DINO shares have surged 92.2% in a year.
Helmerich & Payne: HP beat the Zacks Consensus Estimate for earnings in three of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 124.2%, on average.
Helmerich & Payne is valued at around $5.3 billion. HP has seen its shares gain 140.1% in a year.
Halliburton: Halliburton is valued at some $33.7 billion. The Zacks Consensus Estimate for HAL’s 2022 earnings has been revised 3.5% upward over the past 60 days.
Halliburton, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 5.5%, on average. HAL shares have gained 79.1% in a year.
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