Buckeye Partners Misses on Earnings, Up on Revs - Analyst Blog

Buckeye Partners, L.P.'s BPL earnings from continuing operations in first-quarter 2014 were 87 cents per unit, missing the Zacks Consensus Estimate of 95 cents by 8.4%. Also, quarterly earnings decreased 3.3% year over year, primarily due to an increase in total expenses and dilution from higher units outstanding.

Buckeye Partners released its first-quarter results before the market opened on May 2, 2014. The price edged up 1.1% in intra-day trading to close at $77.15. Despite earnings coming shy of expectation, the positive movement in unit prices could be attributed to the strong top line and clear visibility of future revenues.

Total Revenue

Buckeye Partners' total revenue at the end of the quarter was $1,991.8 million, surpassing the Zacks Consensus Estimate of $1,296 million by 53.7%. Reported top line increased 49.6% from $1,331.1 million a year ago. We believe the improvement in revenues also boosted the unit price.

Total revenue improved primarily on the back increased contribution from Buckeye Partners' Merchant Services (up 56%), Global Marine Terminals (up 45.2%), Development & Logistics (up 41.3%) and Pipeline and Terminal operations (up 15.3%) segments.

Operational Highlights

In the quarter under review, Buckeye Partners' adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations moved up 17.7% year over year to $188.6 million.

Total costs and expenses increased 53.2% year over year to $1,850.6 million. Higher cost of product sales and operating and depreciation expenses led to the increase in total expenses.

The partnership's operating income was $141.3 million, up 14.4% from $123.5 million a year ago.

Interest and debt expenses during the quarter increased 36.4% year over year to $41.2 million, primarily due to higher debt level.

Financial Screening

Buckeye Partners' total cash and cash equivalents, as of Mar 31, 2014, were nearly $31.3 million versus $5.0 million as of Dec 31, 2013.

Long-term debt, as of Mar 31, 2014, was $3,234 million compared with $3,092.7 million as of Dec 31, 2013.

During the quarter, the partnership spent $18.7 million as maintenance capital expenditures, up 266.6% from the prior-year comparable figure.

Cash Distribution

Buckeye Partners will pay cash distribution for first-quarter 2014 of $1.10 per limited partner unit, up around 5% from the prior-year figure. The incremental cash distribution will be paid on May 19, 2014 to unitholders of record as of May 12.

Guidance

In 2014, Buckeye Partners plans to spend $300 million as growth capital investments.

Other Earnings Releases

Boardwalk Pipeline Partners, LP BWP reported first-quarter 2014 earnings of 44 cents per unit, surpassing the Zacks Consensus Estimate of 32 cents by 37.5%.

Our View

Despite reporting unfavorable earnings results in first-quarter 2014, Buckeye Partners' scheduled completion of the acquisition of 20 liquid petroleum products terminals from Hess Corporation HES, steady investments in crude rail operations at the Chicago Complex and construction on crude rail facility at Perth Amboy besides signing long-term contracts are expected to play an important role for its future performance.

Buckeye Partners presently holds a Zacks Rank #3 (Hold). A better-ranked stock in the same industry include Energy Transfer Equity, L.P. ETE, which carries a Zacks Rank #2 (Buy).