Atlas Pipeline Partners: An Early Earnings Look

Earnings season is in full swing, with huge numbers of companies having already given their latest quarterly numbers to investors, and Atlas Pipeline Partners (NYSE: APL) is stepping up to the plate Monday. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk decision.

The midstream energy industry has become a vital deliverer of newly found oil and gas to where consumers can make best use of them. Atlas Pipeline Partners isn't the biggest player in the industry, but it's trying to take advantage of the opportunity in energy infrastructure. Let's take an early look at what's been happening with Atlas Pipeline Partners over the past quarter and what we're likely to see in its quarterly report next Monday.

Stats on Atlas Pipeline Partners

Source: Yahoo! Finance.

Will Atlas Pipeline Partners finally hit a gusher?
Analysts have become increasingly pessimistic in their assessment of Atlas Pipeline's earnings over the past few months. They've reduced consensus earnings-per-share estimates by nearly a dime, even though that hasn't stopped the master limited partnership's units from rising nearly 10% since mid-November.

Atlas was among the big losers in the midstream space in 2012 as it suffered from weak pricing, especially for natural-gas liquids. The MLP has taken steps to remedy its pricing risk, though, hedging its dry-gas and gas-liquids exposure through 2015. That's a positive step if gas prices remain low, although it reduces the potential upside if natural gas recovers within the next few years.

But during the quarter, Atlas joined the wave of consolidation that has started to pick up in the industry, buying privately held Cardinal Midstream for $600 million. Industry giant Kinder Morgan (KMI -0.28%) has demonstrated the value of using acquisitions to build pipeline networks, as its purchases of El Paso and its affiliated El Paso Pipeline Partners (EPB) in 2011 and its recently announced bid for Copano Energy (CPNO) show how economies of scale can help even the biggest players in the space. Given the huge need for pipeline capacity increases in light of the big ramp-up in production, Atlas has the same kind of potential that El Paso had and that Copano has for major players wanting to boost their midstream holdings.

In the coming report, look for Atlas to discuss its recent tender offer to buy out some of its existing debt. With the company replacing notes due in 2018 with cheaper debt that extends out to 2023, Atlas will reduce its borrowing costs, putting it in even better position to grow -- and looking even more attractive to a potential acquirer.

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