Why is Plains All American (PAA) down 2.3% since its last earnings report?

About a month has passed since the company’s last earnings report Plains All American Pipelines, LP PAA. Shares have lost about 2.3% in that time.

Will the recent negative trend continue into its next earnings release, or is PAA due for a breakout? Before we delve into the latest investor and analyst reaction, let’s take a look at the latest earnings report to better understand the key drivers.

Plains All American Beats First Quarter Earnings and Revenue

Plains All American Pipeline, LP reported first-quarter 2018 adjusted earnings of 36 cents per unit, which beat the Zacks Consensus Estimate of 31 cents by 16.13%. Reported profit increased 33.3% from 27 cents in the same quarter a year earlier.

For the quarter, the company reported GAAP earnings of 33 cents per unit, excluding non-recurring items.

Total revenue

For the first quarter, the company reported total revenues of $8,398 million, which topped the Zacks Consensus Estimate of $7,435 million by 12.95%.

Quarterly revenue also increased 25.9% compared to $6,667 million in the year-ago quarter. The top line improved thanks to better performance in the Transportation segment, as well as in the Delivery and Logistics segment.

Segment performance

On Transport segment, adjusted EBITDA of $335 million increased 23% compared to the prior-year quarter, driven by higher volumes from the Permian Basin systems, the Eagle Ford JV system and the Diamond pipeline, which was commissioned in 2017. However, this increase was offset by the sale of non-core assets in the Rocky Mountain and Central regions.

On Amenities segment, adjusted EBITDA of $185 million decreased 2% compared to the same quarter last year. This decline can be attributed to the impact of the sale of non-core assets.

In Supply and logistics segment, adjusted EBITDA of $72 million improved 41% year over year. The improvement was driven by improved NGL and crude oil margins, as well as arbitrage opportunities.

Release highlights

During the quarter, Plains All American’s total costs and expenses were $8,017 million, up 31.9% year over year from $6,076 million, primarily due to an increase in purchases and related costs. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $593 million, up 15.8%.

Interest expense decreased 17.8% to $106 million compared with the prior year.

The company’s operating income fell 35.5% to $381 million from $591 million a year ago.

Financial update

As of March 31, 2018, current assets were $3,962 million compared to $4,000 million as of December 31, 2017.

As of March 31, 2018, Plains All American had long-term debt of $9,050 million, compared to $9,183 million at December 31, 2017. The total long-term debt to total book capitalization ratio was 45%, compared to 46% at year-end 2017.

Conductivity

Plains All American maintains full-year 2018 adjusted EBITDA guidance of $2.3 billion.

The Transportation segment, Facilities segment and Supply & Logistics segment adjusted EBITDA is expected to be $1,535 million, $665 million and $100 million, respectively.

The company expects development capital to amount to $1,400 million, compared with $1,135 million invested in 2017.

How have estimates changed since then?

It turns out that new estimates have been trending upwards over the past month. There have been four higher revisions this quarter, compared to two lower ones. Last month, the consensus estimate moved 7.5% on those revisions.

Plains All American Pipeline, Price and LP Consensus

Plains All American Pipeline, LP Price and Consensus | Plains All American Pipeline, quote from LP

VGM Results

At the moment, PAA has a solid Growth Score of B, but its Momentum is doing slightly better with an A rating. The stock also receives a B rating on the Value side, which puts it in the second quintile for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Based on our ratings, these stocks are more suitable for momentum-oriented investors than for those looking for value and growth.

Perspectives

The stock’s estimates are trending upwards, and the magnitude of these revisions looks promising. Interestingly, PAA has a Zacks Rank #3 (Hold). We expect the stock to deliver consistent returns over the next few months.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Plains All American Pipeline, LP (PAA): Free Stock Analysis Report

To read this article on Zacks.com click here.