MPLX (MPLX +0.45%) will report its third-quarter results on Tuesday, Nov. 3. The energy company’s management team previously said these results should be stronger than what it reported in the second quarter, while the fourth quarter would be even better. Its upcoming earnings report will prove whether that forecast was correct.
Here’s a look at what to watch when the master limited partnership (MLP) reports its third-quarter results later this week.
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The setup: a year built for the back half
MPLX is currently in the middle of a heavy investment phase. The pipeline company spent $5.5 billion last year on growth capital projects and acquisitions. It currently plans to invest $2.9 billion in growth capex in 2026. The company expects this investment will support mid-single-digit growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year.
The MLP generated $3.5 billion of adjusted EBITDA during the first half of this year. That was up less than 2% compared to the prior-year period. This suggests it will need to pick up the pace in the second half. That’s exactly what CEO Maryann Mannen told investors to expect on the second quarter call. She stated that the “third quarter should be stronger than the second quarter, and fourth should be stronger than the third as well.”
That’s due to the expected timing of expansion project completions. The energy company‘s Secretariat I gas processing plant started up in April, followed by Harmon Creek III in August. Meanwhile, its Bay Runner pipeline should have started service in the third quarter. These projects are supplying incremental earnings as they enter commercial service and ramp up operations.
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What to watch in Q3
MPLX’s outlook implies we should see a notable uptick in adjusted EBITDA in the third quarter, compared to the nearly $1.8 billion it reported in the second quarter. After delivering about $7 billion in adjusted EBITDA last year, mid-single-digit growth, or roughly 4% to 6%, implies about $7.3 billion to $7.4 billion for 2026. After reporting $3.5 billion in the first half, the MLP would need to generate $3.8 billion-$3.9 billion in the second half, or almost $1.9 billion per quarter. So, for the third quarter, we’re looking for something around $1.85 billion of adjusted EBITDA.
Investors should also keep an eye on distribution coverage and leverage. MPLX’s board recently declared a third-quarter distribution of $1.2111 per unit, up 12.5% year-over-year, which works out to a yield of over 8% at its recent unit price. It ended the second quarter with a coverage ratio of 1.3x, right at its target level for 2026 and 2027. The higher payout raises the bar. At the new rate, distributions run about $1.2 billion per quarter, so the second quarter’s nearly $1.5 billion in distributable cash flow would only cover the newly raised distribution by about 1.2x. Achieving 1.3x coverage would take roughly $1.6 billion, which is why the second-half ramp matters. Likewise, they should keep an eye on leverage, which, at 3.7x at the end of the second quarter, was comfortably below its 4.0x target range.
Watch for the acceleration
The third quarter is the first real test of MPLX’s back-half promise. Adjusted EBITDA near $1.85 billion would show that the new projects are starting to deliver and keep the full-year target within reach. A number closer to the second quarter’s level would put more weight on a big fourth quarter.
The recently hiked payout also makes the cash flow side matter more, since coverage has to hold near 1.3x as the distribution grows. If MPLX delivers on both fronts, the investment case stays on track. If not, investors will have reason to question whether its heavy investments are delivering the expected growth.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
