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Bear of the Day: Midcoast Energy


Midcoast Energy Partners (NYSE: MEP) has seen significant estimate downgrades over the past ninety days.  This Zacks Rank #5 (Strong Sell) has had its stock estimates significantly trimmed for the next two quarters and for Fiscal 2014 & 2015.

The table below shows the estimate revisions for Midcoast Energy from the past 90 days for the next two quarters and FY 2014 & 2015.

Midcoast Energy Partners is a growth oriented limited partnership formed by Enbridge Energy Partners (NYSE: EEP) which engages in providing natural gas services.  It focuses on gathering, processing, treating, transporting, and marketing natural gas and natural gas liquids to intrastate and interstate pipelines for transportation.  The company operates in two segments; gathering, processing and transportation, and logistics and marketing.

The main drivers behind the downgrades are the following:  lower volumes, declining commodity price, and operational headwinds.  Further, Enbridge Energy, which owns 52% equity ownership interest in Midcoast Energy, will have to help Midcoast in order for the company to meet its funding needs.  Another headwind facing the company as it battles declining volumes and commodity prices.  

Earnings History

Midcoast Energy does not have a good earnings history with four consecutive earnings misses and two consecutive revenue misses.  The company has posted a four quarter average negative earnings surprise of -128.08%.

Price & EPS Surprise

The table below shows the significant decline in price after each poor earnings announcement.  The last decline is reflective of their Q3 earning report where Midcoast Energy missed the EPS estimate by -188%.

Bottom Line

With reduced volumes, and oil prices falling almost daily Midcoast Energy is facing a difficult fourth quarter, and New Year. Estimates indicate a negative trend over the next 1-2 months, and potentially throughout 2015, and therefore Midcoast Energy is our Bear of the Day.  

Other Stocks to Consider

If you are inclined to invest in the Oil Refining & Marketing segment, Murphy USA (NYSE: MUSA), PBF Energy (NYSE: PBF), or Tesoro Corp (NYSE: TSO), are all a Zacks Rank #2 (Buy). 

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