NuStar Energy L.P. (NS)– a master limited partnership (“MLP”) – announced weaker-than-expected fourth quarter results, hampered by softer throughputs on its crude and refined products pipelines, partially offset by improved asphalt margins in its Asphalt and Fuels Marketing segment.

The owner and operator of crude oil and refined products pipelines and storage facilities reported earnings per unit (EPU) of 65 cents, below the Zacks Consensus Estimate of 68 cents.

However, compared with the year-ago period, NuStar’s earnings per unit improved 30.0% (from 50 cents to 65 cents), as a result of strong performances in its storage as well as asphalt and fuels marketing segments.

Revenue of $1,194.2 million surpassed our expectation of $979 million and was 21.5% above the year-earlier level.

Distribution Maintained

NuStar announced quarterly distribution of $1.075 per unit ($4.30 per unit annualized), representing a 0.9% increase over the year-earlier quarter and equal to the third quarter 2010 distribution. The new distribution is payable on February 14 to unitholders of record as on February 8, 2011. Distributable cash flow (DCF) available to limited partners for the fourth quarter was $66.7 million or $1.03 per unit (providing 0.96x distribution coverage), compared with $57.0 million or 99 cents per unit in the year-earlier quarter.

Segmental Performance

Transportation:Quarterly throughput volumes in the Transportation segment were down 5.4% year over year to 874,043 barrels per day. The decline can be attributed to decreased crude oil and refined products pipeline throughputs. Despite lower throughputs, segmental revenues increased 2.9% year over year to $83.3 million. As a result, operating income went up 7.8% to $42.6 million.

Storage:Throughput volumes in the Storage segment rose 1.5% year over year to 677,736 barrels per day. Revenues increased approximately 4.7% to $133.3 million, driven by a 4.8% hike in the storage lease revenue.

Quarterly operating income reached $47.6 million (18.4% year-over-year rise) due to new customer contracts, higher renewal rates on the existing contracts, increased customer demand for storage services, and contributions from NuStar’s recent acquisitions.

Asphalt and Fuels Marketing:As a result of improved gross margins, the Asphalt and Fuels Marketing segment recorded much better performance compared with the year-earlier quarter. Segment operating income, at $15.7 million, rebounded significantly from the loss of $4.7 million incurred during the fourth quarter of 2009.

Our Recommendation

NuStar units currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. NuStar Energy competes in the ‘Oil and Gas Pipelines’ industry with firms like Energy Transfer Partners L.P. (ETP), Atlas Pipeline Partners L.P. (APL) etc.

 
ATLAS PIPLN PTR (APL): Free Stock Analysis Report
 
ENERGY TRAN PTR (ETP): Free Stock Analysis Report
 
NUSTAR ENERGY (NS): Free Stock Analysis Report
 
Zacks Investment Research