What's Behind Energy Transfer's Mixed Earnings?

A solid quarter for ETP is clouded by a big one-time charge.

Feb 21, 2014 at 9:30AM

Fourth-quarter revenue was up at Dallas-based Energy Transfer Partners (NYSE:ETP), but the partnership posted a loss anyway on the impact of a goodwill impairment charge. Let's take a closer look at the partnership's fourth-quarter and full-year results.

The elephant in the room
Energy Transfer's fourth-quarter loss of $462 million was caused by a non-cash goodwill impairment of $689 million related to the partnership's Trunkline LNG subsidiary. Energy Transfer Equity (NYSE:ETE) has since closed on its purchase of Trunkline. The charge obliterated what would otherwise have been a $75 million year-over-year increase in operating income. The loss was exacerbated by increased interest and tax expenses.

The net income loss translated into a loss of $1.90 per limited partner unit for the quarter, and a loss of $0.18 per unit for the full year -- a far cry from last year's net income of $4.42 per unit, but the market more or less shrugged it off.

That said, revenue, adjusted EBITDA, and distributable cash flow were all significantly higher on a year-over-year basis:

 

2012

2013

Revenue

$15.702

$46.339

Adjusted EBITDA

$2.744

$3.953

DCF

$1.191

$1.835

Source: Energy Transfer Partners. Dollar figures in billions.

These numbers imply growth. Indeed, management spent quite a bit of effort in 2013 consolidating numerous acquisitions under one roof. But they also suggest health in the underlying operations. With this chart in mind, let's take a look at ETP's quarter segment by segment.

Operations overview
At the segment level, Energy Transfer's fourth-quarter results vary widely year over year:

Etp

Source: Energy Transfer Partners.

As the chart shows, slight declines in four of the seven segments are not enough to mitigate the gains posted in the midstream, NGL transportation and services, and "other" segments, as 2013's adjusted EBITDA of $986 million was a $35 million improvement over the prior year.

The gains in the NGL transportation segment are particularly noteworthy; earnings received a boost from higher margins across all categories, including transportation, processing and fractionation, and storage. Higher volumes in transportation, processing, and fractionation contributed to the margin expansion.

The two weakest segments based on adjusted EBITDA decline were the intrastate transportation and storage unit and the retail marketing unit. Problems in the intrastate segment stemmed from a significant decline in volume, which dropped revenue $67 million for the quarter. Revenue also declined in the retail marketing segment, from $5.9 billion a year ago to $5.2 billion, largely due to exceptionally high gasoline margins in 2012.

On the bright side
Despite the ugly net income figure, Energy Transfer did post positive distribution coverage for the fourth quarter and the full year. This is extremely important given the partnership's commitment to increasing its quarterly distribution on a consistent basis going forward. In contrast, Energy Transfer did not post positive coverage for its distribution last year. Its annualized payout now stands at $3.68 per limited partner unit, good for a 6.8% yield at today's price. That's a solid yield given the payout is probably the most reliable it's been in the last five years.

Retire rich
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Aimee Duffy has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers