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NuStar Energy (NS) Stock Up 6.8% Despite Missing on Q3 Earnings

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  • NS-PB
  • EOG
  • FANG
  • COP

Shares of NuStar Energy L.P. NS have gained 6.8% since the third-quarter 2021 earnings announcement on Nov 4.

Despite this industry player’s earnings miss, NS's stock rose on strong business performance and higher throughput volumes, backed by its refined products and crude oil pipelines. Besides, a more sustained rebound in refined product demand in the United States and Mexico and improved guidance for the remainder of 2021 led to the share price upside.

Behind the Earnings Headlines

Oil pipeline operator NuStar reported third-quarter adjusted earnings per unit of 16 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 8 cents, attributable to a solid revenue contribution from the pipeline segment.

NuStar’s revenues of $412 million outpaced the Zacks Consensus Estimate of $408 million and increased 13.5% year over year.

It recorded an operating loss of $79.2 million against the profit of $105.04 million in the year-ago corresponding quarter. This downside could be due to a pandemic-related non-operational charge.

Segmental Updates

Pipeline: Total quarterly throughput volumes were 1,974,332 barrels per day (Bbl/d), up 12.7% from the year-ago period’s level of 1,751,471 Bbl/d. Throughput volumes from crude oil pipelines rose 11.3% to 1,374,909 Bbl/d while throughput from refined product pipelines witnessed an increase to 599,423 Bbl/d from 516,295 Bbl/d.

NuStar's Permian Crude System throughput volumes also improved considerably from the sequential quarter’s level. As a result, the segment’s revenues increased 11.3% year over year to $196.2 million. NS’s Pipeline unit reported an operating profit of $40.2 million, down from $83.8 million earned in the year-ago period.

Storage: Throughput volumes fell to 462,094 Bbl/d from 466,229 Bbl/d in the prior-year quarter. The unit’s quarterly revenues marginally fell 11.7% year over year to $108.1 million due to lower storage terminal revenues (from $93.2 million to $77.4 million). The segment’s operating loss came in at $91.1 million against the income of $48.8 million in the corresponding quarter of 2020 due to reduced throughputs at its Corpus Christi North Beach port.

Fuels Marketing: Product sales increased to $108 million from $63.9 million in the year-ago quarter. Moreover, the cost of goods rose 68.6% from the prior-year period to $106.5 million. NuStar experienced weak margins from its bunkering business. The segment recorded earnings of $949,000 in the quarter under review against the loss of $31,000 in third-quarter 2020.

NuStar Energy L.P. Price, Consensus and EPS Surprise

NuStar Energy L.P. Price, Consensus and EPS Surprise
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

Third-quarter 2021 distributable cash flow available to limited partners was $92.1 million (providing 2.10X distribution coverage), higher than $84 million (1.92X) in the year-ago period. A coverage ratio far in excess of 1 implies that NuStar is generating more than enough cash in the quarter to cover its distribution.

As of Sep 30, NS’s total consolidated debt was $3.4 billion.

NuStar anticipates refined product systems to function at roughly 100% of the pre-pandemic run-rate for the rest of 2021.

NuStar anticipates adjusted EBITDA of $685-$715 million in 2021, higher than its earlier estimates.

In 2021, NS anticipates spending $140-$160 million on strategic capital and $35-45 million on reliability capital.

Zacks Rank & Stocks to Consider

NuStar currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are EOG Resources EOG, Diamondback Energy FANG and ConocoPhillips COP, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources reported third-quarter 2021 adjusted earnings per share of $2.16, beating the Zacks Consensus Estimate of $2.01. Strong earnings were driven by increased production volumes and a higher realization of commodity prices.

EOG announced a quarterly dividend of 75 cents per share, indicating an 82% increase from the previous level. The dividend will be paid out on Jan 28, 2022, to its shareholders of record as of Jan 14, 2022. EOG Resources also declared a special dividend of $2 per share. Moreover, the board of directors updated its share repurchase authorization to $5 billion.

Diamondback Energy reported third-quarter 2021 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.81 and the year-ago quarter’s earnings of 62 cents. FANG’s bottom line was aided by better-than-expected production.

The board of directors declared a dividend of 50 cents per share for the third quarter, hiking 11.1% from the previous payout of 45 cents. The amount will be paid out on Nov 18, 2021, to its shareholders of record as of Nov 11. FANG also generated a free cash flow of $740 million in the third quarter.

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. This outperformance is led by increased production volumes owing to the Concho acquisition and rising realized commodity prices.

Based in Houston, TX, this one of the world’s largest independent oil and gas producers’ capital expenditures and investments totaled $1.3 billion, and dividend payments grossed $579 million. ConocoPhillips’ net cash provided by operating activities was recorded at $4.8 billion, up from the year-ago figure of $868 million. COP generated a free cash flow of $2.8 billion in the third quarter.


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