JP Energy Partners LP :JPEP-US: Earnings Analysis: Q3, 2016 By the Numbers : November 28, 2016

JP Energy Partners LP reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of JP Energy Partners LP – Sunoco Logistics Partners L.P., Valero Energy Partners LP, MPLX LP and Inter Pipeline Ltd. (SXL-US, VLP-US, MPLX-US and IPPLF-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 122.81 million, Net Earnings of USD -6.89 million.
  • Gross margins widened from 0.09% to 3.24% compared to the same period last year, operating (EBITDA) margins now 4.74% from 0.74%.
  • Year-on-year change in operating cash flow of 238.75% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 122.81 130.77 97.49 153.21 255.85
Revenue Growth (%YOY) -52 -61.84 -67.36 -61.62 -40.3
Earnings (mil) -6.89 -2.37 -2.69 -32.1 -8.45
Earnings Growth (%YOY) 18.43 52.1 -504.36 -72.42 -50.59
Net Margin (%) -5.61 -1.81 -2.76 -20.95 -3.3
EPS -0.19 -0.06 -0.09 -1.26 -0.23
Return on Equity (%) -5.83 -1.94 -2.16 -24.12 -5.93
Return on Assets (%) -4 -1.36 -1.5 -16.57 -4.1

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Market Share Versus Profits

Revenues History
Earnings History

JPEP-US‘s change in revenue this period compared to the same period last year of -52.00% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that JPEP-US is holding onto its market share. Also, for comparison purposes, revenues changed by -6.09% and earnings by -191.37% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 0.09% to 3.24% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 0.74% to 4.74% compared to the same period last year. For comparison, gross margins were 7.65% and EBITDA margins were 9.32% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

JPEP-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 4.23 days from 10.48 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

JPEP-US‘s change in operating cash flow of 238.75% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

JP Energy Partners LP owns, operates, develops and acquires a diversified portfolio of midstream energy assets and also provides midstream infrastructure solutions for the supply of crude oil, refined products and NGL distribution hubs. The company operates its business through three operating segments: Crude Oil Pipelines and Storage, Refined Products Terminals and Storage, and NGL Distribution and Sales. The Crude Oil Pipelines and Storage segment consists of a crude oil pipeline operation and a crude oil storage facility. It also consists of crude oil supply activities and a fleet of crude oil gathering and transportation trucks. The Refined Products Terminals & Storage segment aggregates storage capacity of barrels at two refined products terminals. The NGL Distribution & Sales segment consists of three businesses: portable cylinder tank exchange, NGL sales and NGL transportation. JP Energy Partners was founded by Christopher Hill and Jason Patrick Barley on May 5, 2010 and is headquartered in Irving, TX.

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