Bear of the Day: Boardwalk Pipeline Partners (BPW)

Boardwalk Pipeline Partners (BWP) was hit for a 44% drawdown after its last earnings report on February 10, 2014. The stock was crushed down to the low teens and analysts lowered estimates. Today, it is a Zacks Rank #5 (Strong Sell) stock and is the Bear of the Day.

Cutting the Dividend

The big reason for the 44% one day drop in share prices came as the company cut its dividend payout from $0.5325 to $0.10. The company noted that this would help strengthen is balance sheet and would help to avoid issuing new units.

A drop of 78% in net income was the primary reason for the dividend reduction.

Company Description

Boardwalk Pipeline Partners owns and operates three interstate natural gas pipeline systems including integrated storage facilities. The company also owns approximately 255 miles of NGLs pipelines serving customers in Louisiana. In addition, it has underground storage caverns having aggregate capacity of approximately 207.0 billion cubic feet of working natural gas and 17.6 million barrels of NGLs. The company serves customers, including producers of natural gas, local distribution companies, marketers, electric power generators, industrial users, and interstate and intrastate pipelines. The company is headquartered in Houston, Texas.

Poor Earnings History

Over the last six quarters, BWP has beaten the Zacks Consensus Estimate only 1 time. There have been three misses and two meets over that time horizon.

Interestingly, the company has not beaten the Zacks Consensus Revenue estimate in any of those quarters.

BWP Sees Estimates Moving Lower

Estimates for BWP have fallen recently. The Zacks Consensus Estimate for 2014 stood at $1.41 in July last year. It then moved lower to $1.24 by October and was trimmed again to $1.19 in January. The current Zacks Consensus Estimate is calling for $0.84 after analysts slashed numbers following the February earnings release.

Estimates for 2015 are also moving lower, but still show signs of growth. The current 2015 Zacks Consensus Estimate is calling for $0.93.

Valuation

After the significant decrease in price, the valuation for BWP has become rather reasonable. The trailing PE of 11.7x is well below the nearly 30x industry average. The forward PE of 17x is also well below the 26x industry average. Price to book of 0.9x is well below the 2.2x industry average and may bring value investors to the table.

Short Interest

Investors should be aware of the short interest position in a stock they are thinking of trading. There has been some very interesting action in the short position for this stock over the last three reporting periods. Following the poor earnings report, short interest move from 1.9M shares to 2.8M shares in the two reported periods for February. Then the 3/14 number came out and saw short interest move to 4.3M shares only to retreat to 2.4M shares.

The Chart

The price and consensus chart that is produced by Zacks shows how the stock has moved when compared to earnings estimate changes. Investors should take particular note of this P&C chart. IT shows how estimates started moving lower before the stock price did and still show the potential for further decline.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Follow The Money Trader a trading service that tracks institutional money flows and looks for great stock picks from that data.

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