3Q Earnings Released

Press release here.

There was lots of chatter around $7/share this quarter in Yahoo Finance discussion boards and Seeking Alpha comment threads.  The report of $6.52/share is a little light relative to the aforementioned prediction but it represents a fine period of 53% and 145% growth in the O&G royalty and water businesses respectively.

The $6.52 Q3 print puts TPL at $21.79 per share in trailing 12mo earnings.  If we stick with the 38x P/E that was discussed in the last post, that gets “fair value” to $828.  I say “fair value” loosely as picking a P/E is more art than science.

In the coming days I’m going to do some segment analysis to show top line and bottom line trends.  One thing that is becoming readily apparent is that easements and sundry income will be lumpy as easement income is no longer being smoothed.

One small aberration was the 167 acre land sale at $25.7k/acre.  TPL land sales are rare these days and that price was really something.  This isn’t going to happen but the whole trust sold at that valuation gets the value of the surface acreage to ~$23B.  Again, that is a big stretch but the sale shows the “hidden asset” nature of TPL which is easy to overlook in the current era of high flying top and bottom line growth.



2 thoughts on “3Q Earnings Released

  1. Looking forward to your analysis of earnings. I agree they are impressive overall, but I’m a tad disappointed to see a small decline in EPS when compared to last quarter (the earnings report, understandably, always compare YOY).
    As part of your deep dive, I would be interested in your thoughts about the volume of share buybacks, which seem to be on the decline over the last two years. I can understand how the number of share buybacks will naturally be reduced due to the big spike in share price, but what I would like to know is if the trust’s total outlay of funds used for buybacks had remained constant, or if there has been a strategic shift in direction to invest in the water business instead.

    Liked by 1 person

    • I was also expecting a $7 range EPS number. It appears the water business is taking some earnings to build out. Given what I see that is a good decision for future earnings and growth, but its having an impact on EPS.

      Agree with you Jeff, they clearly are buying back less shares this year than in a typical year. Perhaps because the shares are now more fully priced, but I think the days of 2% share count reduction per year are over for a while. My math shows 10,802 shares purchased in the quarter. Lets assume an average cost of $750, which cost TPL $8.1 m to buy the shares. If they had not bought the shares, that would have dropped another dollar to the EPS number.

      Its also interesting that if they bought those shares equally over the quarter, (77 trading days), thats just 140 shares a day being retired. Not enough in my opinion to provide any price support.


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