ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Index Insights
  2. Modest MLP/Midstream Estimate Revisions Contrast with Equity Performance
Index Insights
Share

Modest MLP/Midstream Estimate Revisions Contrast with Equity Performance

Bryce BinghamMay 13, 2020
2020-05-13

With the release of quarterly earnings from Equitrans Midstream (ETRN) and EQM Midstream (EQM) this morning, energy infrastructure’s 1Q20 earnings season has all but come to a close with only a few names left to report results. Guidance updates along with management commentary have helped paint a clearer picture of expectations for midstream cash flows in a challenging macro environment. As we discussed recently, analyst revisions to EBITDA forecasts have been modest for energy infrastructure companies when compared to the broader energy sector (read more), reflecting the resiliency of their fee-based business model (read more). The chart below provides an update on index-level EBITDA consensus forecast revisions from January 31 to May 11 (i.e. since oil prices collapsed), comparing midstream with the broader energy sector, as represented by the S&P Energy Select Sector Index (IXE), and exploration and production (E&P) companies, as represented by the S&P Oil & Gas Exploration & Production Select Industry Index (SPSIOP). Given that earnings season for midstream and the rest of energy has largely concluded, forecasts should now be more reflective of updated company outlooks. Current EBITDA estimates for the Alerian Midstream Energy Select Index (AMEI) are mostly flat compared to estimates prior to the collapse of oil prices, while Alerian MLP Infrastructure Index (AMZI) estimates for 2020 and 2021 EBITDA have only seen modest downward revisions of 5.9% and 10.0%, respectively. This contrasts sharply with AMEI and AMZI’s year-to-date total returns of -36.1% and -42.3% through May 13. Comparatively, 2020 EBITDA projections for the IXE Index have been nearly cut in half, while E&P EBITDA estimates for both 2020 and 2021 have been lowered by over 50%. On a total-return basis, IXE has fallen -39.4% this year, and SPSIOP has declined by -49.1%.

This is the image alt text

Recent guidance updates from midstream companies have mirrored this relative stability, with several names maintaining or slightly adjusting full-year estimates (read more). Aggregating 2020 EBITDA guidance updates from 23 MLPs and C-Corps, the average downward revision to 2020 EBITDA guidance was 9.0%, and the median revision was 7.8%. Cheniere Energy (LNG), Pembina Pipeline (PBA/PPL CN), and Williams (WMB) all restated prior EBITDA guidance alongside their 1Q20 earnings reports. After forecasting no change to its initial EBITDA guidance in its March 17 presentation, Energy Transfer (ET) lowered its full-year EBITDA expectations to $10.7 billion at the midpoint earlier this week. This represents a 4.5% downward revision from the midpoint of initial guidance. Management also noted that it expects 90-95% of 2020 EBITDA to be driven by fee-based contracts, further underscoring cash flow stability. The partnership continues to target positive free cash flow after its distribution in 2021 driven by project completions and a decline in growth capital spending. ETRN stands alone as the only midstream company to raise prior EBITDA projections. This morning, ETRN updated its 2020 financial expectations, which included increasing its full-year EBITDA guidance. All financial guidance is dependent on the company’s merger with EQM closing in June. Management also noted that it no longer has financial guidance past 2020, implying that the forecasts provided in February out to 2023 are now no longer applicable.

The decline in oil prices does not impact all energy companies in the same way. The relative defensiveness and stability of midstream cash flows is clearly evident in a comparison of forward EBITDA estimate revisions for midstream relative to broader energy and E&Ps. Despite the greater stability of midstream cash flows, the space has largely sold off in line with broader energy and moderately outperformed E&Ps. While the impact of negative energy sentiment and forced selling (for example, closed-end fund deleveraging for MLPs) are difficult to quantify, there seems to be a distinct disconnect in midstream equity performance relative to broader energy and E&Ps when considering the relatively mild revisions to midstream forward EBITDA expectations.


Content continues below advertisement

» Popular Pages

  • Tickers
  • Articles

Sep 29

A Fixed Income Primer for Constructing Portfolios

Sep 29

Main Management Market Note: September 29, 2023

Sep 29

Higher for Much Longer?

Sep 29

Moving Averages: S&P Ends September Down 4.9%

Sep 29

This Week in ETFs: FormulaFolios Renamed & Adds New Funds

Sep 29

Play Online Car Sales News in These 2 China ETFs

Sep 29

SEC Opens Ethereum Futures ETF Floodgates

Sep 29

VettaFi Voices On: Managing Risk in an Uncertain Economy

Sep 29

SPYI Outperforms SPY in Challenging 3rd Quarter

Sep 29

More Rate Hikes? Watch Treasury ETF USFR

QQQ

Invesco QQQ Trust Series I

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

JEPI

JPMorgan Equity Premium...

TLT

iShares 20+ Year Treasury...

SCHD

Schwab US Dividend Equity ETF...

SMH

VanEck Semiconductor ETF

VGT

Vanguard Information...

VTI

Vanguard Total Stock Market...

XLK

Technology Select Sector SPDR...

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X