In an Aug. 1 research note, Raymond James analyst Justin Jenkins reported that Magellan Midstream Partners L.P.'s (MMP:NYSE) Q2/19 results are positive, as is the nearing completion of several growth projects.
Jenkins highlighted that the master limited partnership (MLP) beat adjusted EBITDA and distributable cash flow (DCF) estimates in Q2/19. Adjusted EBITDA was $378.3 million versus Raymond James' $355.5 million estimate and consensus' $356 million forecast. Strong performance in Magellan's Crude and Refined Products segments and lower maintenance and interest expense drove this.
DCF came in at $314.8 million, well above Raymond James and consensus' estimates of $284.3 million and $285.1 million, respectively.
As for performance by segment, Jenkins indicated that Refined Products and Crude did the best, each beating Raymond James' projection. Refined Products returned a $238 million operating margin; Raymond James expected $205.5 million. Crude's operating margin was $160.3 million, and Raymond James forecasted $148 million.
The Marine segment fared worse. Its Q2/19 operating margin was $30 million, below Raymond James' $33.4 million forecast. Refined Products and Crude, however, more than offset Marine's underperformance.
Jenkins noted that based on strong Q2/19 performance and a positive outlook for Q3/19 spot shipments on BridgeTex/Longhorn, Midstream's management increased full-year 2019 EBITDA/DCF guidance by 3%, or $40 million, which still remains conservative, Jenkins indicated.
He added, "Further, if the market opportunity remains open (which we think is likely for at least some portion of Q4/19), continued spot shipments would add about $20 million per quarter to DCF based on prior guidance." In addition, management remains committed to its goal of growing distribution by 5% this year.
Jenkins pointed out that several of Midstream's growth projects are nearly finished, including the Galena Park marine terminal, the Pasadena joint venture, Seabrook and others. To complete them, management expects to outlay $1.1 billion in 2019 and $150 million in 2020.
Raymond James has an Outperform rating on Magellan Midstream. The MLP currently has a share price of around $66.64.[NLINSERT]
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Disclosures from Raymond James, Magellan Midstream Partners L.P., August 1, 2019
Analyst Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.
The analysts Justin Jenkins and J.R. Weston, primarily responsible for the preparation of this research report, attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.
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