If you are an investor in Magellan Midstream Partners (NYSE:MMP), you aren't in it for the thrills of rapid growth and skyrocketing stock prices. Instead, you're probably looking for a consistent, reliable business that will continue to churn out cash. If that is the case, then this past quarter's earnings report was right up your alley. By no means was it exciting, but it was another quarter of delivering consistent results.

Here's a look at Magellan's most recent earnings report and what investors should make of the company as of late. 

Magellan Midstream Partners' results: The raw numbers

Metric Q1 2018 Q4 2017 Q1 2017
Revenue $678.8 million $673.3 million $642.1 million
Adjusted EBITDA $324.4 million $377.4 million $288.3 million
EPS $0.92 $1.04 $0.98
Distributable cash flow $258.9 million $308.2 million $227.6 million

Data source: Magellan Midstream Partners earnings release. EPS = earnings per share.

While not quite as good as the prior quarter, Magellan's first-quarter results were respectable in their own right. The company recorded higher transportation volumes in both its refined products and crude oil segments, and management even raised its guidance for 2018 distributable cash flow. Net income was down slightly because of two one-time adjustments totaling $26 million. One was related to an accounting error from one of its actuaries that calculated pension valuations, and the other was for revaluing some commodity price contracts. These pricing contracts, known as mark-to-market adjustments, typically offset themselves throughout the year. 

Breaking down the business by its various segments, it's pretty clear that its crude oil segment has been the driver of better results. Not only has Magellan been adding several new assets to this segment, such as its condensate splitter in Corpus Christi, Texas, but volumes for its two Permian Basin pipelines have been very strong lately. The one business that has been weak lately has been its marine storage segment, which is still incurring some higher maintenance costs to repair storage tanks damaged by Hurricane Harvey back in the third quarter. 

MMP operating margin by business segment for Q1 2017, Q4 2017, and Q1 2018. Shows gains for crude oil offset by declines in refined products and marine storage year over year.

Data source: Magellan Midstream Partners earnings release. Chart by author.

What happened this quarter?

  • The day before the earnings announcement, management announced it had called an open season (in other words, asking customers who may be interested) in expanding its refined petroleum product pipeline between Frost and Odessa, Texas. The original plan was to expand the line from 100,000 barrels per day to 140,000, but high demand has the company asking if anyone else would like to move product on the line as well as build a new product terminal in West Texas.
  • The company inked a deal with market maker Intercontinental Exchange to create a publicly traded market for 1.5 million barrels of crude oil storage at its East Houston terminal. Unlike typical contract storage rates Magellan charges to customers to reserve the right to store a certain amount of oil in its tanks, this will allow traders to openly trade storage space and allow for greater flexibility for producers, refiners, and future crude oil exporters to lease short-term space.
  • Even though management raised its distributable cash flow guidance to $1.08 billion for the year, it elected to maintain its current distribution guidance and will likely use the excess generated cash to fund its capital budget.
Oil terminal.

Image source: Getty Images.

What management had to say

Magellan just held its analyst day conference last month, so CEO Michael Mears' press release statement was brief. In it, he gave a high-level overview of the company's outlook and why he and his team were comfortable raising guidance. 

Magellan kicked off the year 2018 with solid financial results and strong demand for our fee-based transportation and terminals services. Our outlook for the remainder of 2018 has strengthened based on favorable market conditions for refined products and crude oil pipeline shipments, combined with an improved commodity pricing environment. Looking beyond the current year, we remain optimistic about a number of potential expansion projects in advanced stages of review that could further benefit Magellan's future results.

MMP Chart

MMP data by YCharts.

Stay the course

Even though Magellan incurred a couple of charges that prevented it from posting another record-breaking quarter, this was a solid quarter in its own right. The company continues to churn out healthy rates of cash to cover its payout and give management some extra to fund its growth projects. That extra cash will come in handy because the company has several projects on its plate right now with multiple export terminals and the infrastructure to support them.

From an investor standpoint, this pretty much reconfirms the value proposition that Magellan has made to its unitholders for years: We might not be the fastest growing company out there, but we're growing at a steady rate we can sustain for years into the future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.