Investors and analysts are at odds.
Despite months of falling stock prices, analysts are posting bullish ratings ahead of midstream gas giant Energy Transfer Partners’ third quarter earnings scheduled for release after markets close tomorrow.
The average EBITDA estimate from 14 analysts polled by Bloomberg is $1.44 billion for the quarter compared to $1.50 billion reported for the same quarter last year and up from $1.37 billion reported the previous quarter. The company beat five of the last seven EBITDA estimates.
An average of nine analysts anticipate Q3 revenues of $6.13 billion, down from estimates of $10.16 billion for the same quarter last year where the company fell seriously short posting Q3 revenues of $6.60 billion, 35 percent lower than the estimate. Revenues for Q2 2016 were $5.28 billion, just falling short of analyst estimates.
Adjusted EPS for the quarter was forecast at 28 cents according to estimates from 12 analysts compared with 11 cents reported for the previous quarter and 12 cents reported for the same quarter last year.
It’s been a tough quarter with Energy Transfer Partners struggling to finance its ambitious capital expansion plan and no respite from low oil and gas prices which erode revenues over the long term.
Both these dampers have been exacerbated by months of protest against the Dakota Access pipeline by Native Americans and a growing group of allies.
Its stock priced has fallen since an August high of $42.85 per share. After an announcement from the federal government on September 8th sympathetic to pipeline protesters, the stock has accelerated its fall from $40.59 then to today’s $33.37 per share, an overall fall of 22 percent.
Nonetheless, a slew of analysts have upgraded Energy Transfer Partners’ rating throughout the quarter beginning with Stifel upping its rating to buy in early August. Late September saw a Baird raise to outperform closely followed by a boost to overweight from Stephens while Mizuho Securities started rating the company with its first evaluation of buy. Most recently Bernstein followed suit raising its rating to outperform on Monday.
This wave follows upgrades to outperform from BMO Capital Markets in April and an upgrade to buy from Goldman Sachs in May.
Of all analysts polled by Bloomberg, 15 rate Energy Transfer buy, six rate hold and none rate sell.
This optimism from analysts appears to stem from confidence in fundamentals, Energy Transfer Partners’ diversified assets including 62,500 miles of natural gas pipelines, processing facilities and natural gas storage.
A Monday note from Bernstein analyst Jean Ann Salisbury suggested Energy Transfer is being undervalued by investors and trading as if it will “never see a penny” of earnings from four of its major growth projects- Dakota Access, Rover, Revolution and Mariner East 2 pipeline. “Current valuation reflects the worse case outcome,” she said. And the likelihood of that is “improbably negative,” she concluded.