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This Move Could Send Inergy, L.P. (NRGY) Earnings Soaring

Inergy, L.P. (NYSE:NRGY) will release its quarterly report next Tuesday, and with the company having divested itself of its propane-retail business to focus on natural gas pipelines and storage facilities, investors wondered what direction Inergy saw itself moving in strategically. But the master limited partnership (or MLP) answered that question this quarter, and it could have a positive long-term impact on Inergy earnings.

Inergy, L.P.Inergy completed the sale of its propane business to Suburban Propane Partners LP (NYSE:SPH) last year, and since then, it has focused its attention on its majority interest in its Inergy Midstream LP (NYSE:NRGM) business, which has various midstream assets in the New York and Pennsylvania area. But a proposed merger could greatly boost Inergy, L.P. (NYSE:NRGY)’s prospects going forward. Let’s take an early look at what’s been happening with Inergy over the past quarter and what we’re likely to see in its quarterly report.

Stats on Inergy

Analyst EPS Estimate $0.03
Year-Ago EPS ($0.15)
Revenue Estimate $391.75 million
Change From Year-Ago Revenue 5.4%
Earnings Beats in Past 4 Quarters 2

Source: Yahoo! Finance.

Why do Inergy earnings look poised to rebound?
Analysts have cut back their views on Inergy, L.P. (NYSE:NRGY) earnings in recent months, with a $0.02-per-share drop in June-quarter estimates and a more extensive $0.12-per-share cut to full fiscal 2013 figures. The shares, however, have produced strong returns of more than 20% since late April.

Most of the gains Inergy, L.P. (NYSE:NRGY) has seen came in early May, when the company announced that it would combine with Crestwood Midstream Partners LP (NYSE:CMLP) to create a larger network of energy transportation and storage assets. The deal will give the combined company a much more extensive reach, adding the Eagle Ford, the Bakken, and the Permian Basin to Inergy, L.P. (NYSE:NRGY)’s existing Marcellus shale play exposure. Inergy unitholders will get about a 30% interest in the combined company, while Crestwood Midstream Partners LP (NYSE:CMLP) investors will get about 24% and Inergy Midstream unitholders will get 19%. The rest will be split between internal holdings and Crestwood’s parent company, whose shares don’t trade publicly.

Inergy clearly hopes that the transaction will help it become a much larger player in the national midstream energy scene. With its foot in the door at nearly every high-value shale play in the nation, the combined Inergy-Crestwood entity will have plenty of growth opportunities to choose from as it seeks to take greater control of its competitive position in the industry.

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