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This Move Could Send Inergy Earnings Soaring

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Inergy (NYSE: CEQP  ) will release its quarterly report next Tuesday, and with the company having divested itself of its propane-retail business to focus on natural gas pipelines and storage facilities, investors wondered what direction Inergy saw itself moving in strategically. But the master limited partnership (or MLP) answered that question this quarter, and it could have a positive long-term impact on Inergy earnings.

Inergy completed the sale of its propane business to Suburban Propane (NYSE: SPH  ) last year, and since then, it has focused its attention on its majority interest in its Inergy Midstream (UNKNOWN: NRGM.DL  ) business, which has various midstream assets in the New York and Pennsylvania area. But a proposed merger could greatly boost Inergy's prospects going forward. Let's take an early look at what's been happening with Inergy over the past quarter and what we're likely to see in its quarterly report.

Stats on Inergy

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$391.75 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Why do Inergy earnings look poised to rebound?
Analysts have cut back their views on Inergy earnings in recent months, with a $0.02-per-share drop in June-quarter estimates and a more extensive $0.12-per-share cut to full fiscal 2013 figures. The shares, however, have produced strong returns of more than 20% since late April.

Most of the gains Inergy has seen came in early May, when the company announced that it would combine with Crestwood Midstream Partners (UNKNOWN: CMLP.DL  ) to create a larger network of energy transportation and storage assets. The deal will give the combined company a much more extensive reach, adding the Eagle Ford, the Bakken, and the Permian Basin to Inergy's existing Marcellus shale play exposure. Inergy unitholders will get about a 30% interest in the combined company, while Crestwood investors will get about 24% and Inergy Midstream unitholders will get 19%. The rest will be split between internal holdings and Crestwood's parent company, whose shares don't trade publicly.

Inergy clearly hopes that the transaction will help it become a much larger player in the national midstream energy scene. With its foot in the door at nearly every high-value shale play in the nation, the combined Inergy-Crestwood entity will have plenty of growth opportunities to choose from as it seeks to take greater control of its competitive position in the industry.

Inergy also completed the distribution of 56.4 million Inergy Midstream units to its own unitholders in June. The move streamlined the Crestwood transaction, allowing parent Crestwood Holdings to acquire Inergy's general partner. Several moves remain, but the companies expect to complete the transaction during this quarter.

In the Inergy earnings report, watch to see what the MLP says about the status of the merger and the strategic vision for its future. As long as domestic energy production continues to thrive, the combined midstream entity should have plenty of opportunities to see earnings grow well into the future.

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Click here to add Inergy to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 01, 2013, at 10:54 PM, toomuchgas wrote:

    NRGM looks like the one to hold.

  • Report this Comment On September 04, 2013, at 3:45 AM, susan400 wrote:

    Disagreement- yes the merger w CMPL is positive.

    High earnings for a QTr is nearlymeaningless. For yrs NRGY NRGM have been very misinterpreted, so common. NRGM is all about expansion of their NE PA gathering and transport.

    TMF on to this 6 m0o ago? The story goes back 3+yrs.

    Shiert term , high costs are creating the assets = inexact anaylsis of current financiakl reports. Intermediate Key is how fast an how much we rise to former dist rates. Or close to. NET a very good asset, NE PA is just 3 yrs unerway, 37 to go.

    Ideally, the misunderstanding s of this outfit, so common all over the net, may bring in some addicitonal liquidation. as the merger complexity is finalized. Here is Hoping.

    Would love to see it 1t 20.25.

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Related Tickers

9/30/2016 4:02 PM
CEQP $21.25 Down -0.37 -1.71%
Inergy CAPS Rating: **
CMLP.DL $0.00 Down +0.00 +0.00%
Crestwood Midstrea… CAPS Rating: *****
NRGM.DL $0.00 Down +0.00 +0.00%
SPH $33.30 Down -0.05 -0.15%
Suburban Propane P… CAPS Rating: *****