Magellan Tops 3Q Profit As Refined Products Demand Improves

Magellan Midstream Partners delivered upbeat 3Q results as the refined petroleum products and crude oil distributor is witnessing a recovery in demand trends for refined products.

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Magellan’s (MMP) 3Q earnings of $0.94 came ahead of analysts’ estimates of $0.84 but plunged 21% year-over-year. The company’s 3Q revenues of $598.3 million fell 8.9% year-over-year but exceeded the Street consensus of $574.9 million.

The company’s 3Q distributable cash flow (DCF) decreased to $258.8 million in 3Q from $306.8 million in the year-ago quarter. For 2020, the company expects DCF to be $1.025 billion, assuming a recovery in demand trends to continue for refined products for the rest of the year.

As for 4Q, Magellan expects average base business volumes (excluding the impact of expansion projects) to decline by approximately 13% year-over-year. Total refined products volumes are also forecasted to fall by approximately 7% year-over-year in 4Q. (See MMP stock analysis on TipRanks)

Following the company’s 3Q results, Raymond James analyst Justin Jenkins maintained a Buy rating and a price target of $45 (26.6% upside potential). The analyst said “While COVID-19 has clearly disrupted business trends, Magellan retains a best-in-class balance sheet (low-3s bank leverage even in 2020’s downturn) and an asset base that remains robust over the medium term.” Jenkins added that “As MMP responds to still-challenging market conditions in the near term, we believe the company will retain a strong/flexible balance sheet and growth optionality.”

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 4 Buys. The average price target of $46.75 implies upside potential of about 31.5% to current levels. Shares have dropped by 43.5% year-to-date.