What Drove MPLX’s Earnings Growth in Q2 2018?

MPLX’s second-quarter results

MPLX (MPLX) reported its second-quarter results on July 26 before the markets opened. The stock closed 2.1% higher for the day due to strong earnings growth for the quarter. MPLX reported an adjusted EBITDA of $867 million for the quarter—up 83% from $474 million in the second quarter of 2017. The massive growth was mainly driven by earnings from assets acquired from Marathon Petroleum (MPC).

What Drove MPLX’s Earnings Growth in Q2 2018?

MPLX’s distributable cash flow for the second quarter rose to $675 million from $370 million in the second quarter of 2017. The above graph shows MPLX’s distributable cash flow and per unit distributions in the last four years.

MPLX’s distributions

MPLX raised its distributions for the second quarter to $0.62 per unit—a sequential rise of 1.6%. As the above graph shows, MPLX’s distributions have been on a rising trend in the last four years. Since MPLX’s IPO in 2012, it has increased distributions for 22 consecutive quarters.

MPLX’s distribution coverage ratio for the quarter was 1.36x. The coverage ratio has remained well above one in the last several years. MPLX’s coverage ratio for 2017, 2016, 2015, and 2014 was 1.28x, 1.23x, 1.27x, and 1.22x, respectively. The company intends to maintain a coverage ratio of 1.2x or higher while growing distributions 10% for 2018.

MPLX’s yield

MPLX is trading at a yield of ~6.9%—higher than many of its peers. Enterprise Products Partners (EPD) is trading at a yield of ~5.7%, while Magellan Midstream Partners (MMP) is trading at a yield of ~5.2%. Currently, Plains All American Pipeline (PAA) yields ~4.8%.