Yahoo Finance Should Investors Be Worried about DPM’s Flat Distribution Growth?
DCP Midstream 1Q15 Earnings: Distribution Should Stay Flat in 2015
Stock price fell after 1Q15 earnings release
DCP Midstream Partners (DPM) released its 1Q15 earnings on May 6, 2015. On the next day, DPM stock fell by ~4.27%. This could have resulted from two events.
Firstly, the company missed its revenue and EBITDA (earnings before interest, tax, depreciation, and amortization) estimates by $430.8 million and $66.7 million, respectively. Secondly, investors are concerned about DCP Midstream Partners’ flat quarter-over-quarter distribution growth.
Since November 2014, DCP Midstream Partners’ stock has fallen by ~25%, as shown in the below graph. This shows that flat distribution growth may not be the sole reason for this decline. Other factors such as falling natural gas prices may negatively affect DPM’s stock. We will examine these factors and the company’s valuation later in this series.
In this series, we will analyze DCP Midstream Partners’ (DPM) latest performance, look into its recent hedging program, and discuss the company’s outlook for the rest of 2015. But first, let’s look into DPM’s current distribution per unit.
Distribution per unit
In its latest earnings release, DCP Midstream Partners announced a distribution per unit of $0.78 (or $3.12 on an annualized basis), an increase of ~4.7% year-over-year (or YoY).
Among its peers, Energy Transfer Partners (ETP) posted a YoY distribution growth of ~8.6%, while Crestwood Midstream Partners (CMLP) posted a flat YoY distribution growth in 1Q15. During the same timeframe, the Alerian MLP ETF (AMLP) distribution grew by ~5.2%.
About DCP Midstream Partners
DCP Midstream Partners is a midstream MLP (master limited partnership) managed by its general partner. DCP Midstream LLC, which owns 100% interest of DPM’s general partner, is a joint venture between its owners Phillips 66 (PSX) and Spectra Energy Corporation.
As a midstream MLP, the company operates in the following three segments:
Natural Gas Services: This segment involves natural gas compression, gathering, processing, transportation, and storage.
NGL Logistics: This segment involves NGL (or natural gas liquids) production, fractionation, transportation, and storage. Under this segment, the partnership also sells NGLs and recovers and sells condensate.
Wholesale Propane Logistics: This segment is involved in propane transportation, storage, and sales in wholesale markets.
For a detailed overview of DCP Midstream Partners’ segments, you can refer to the Market Realist series DCP Midstream Partners Overview.
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