Global Partners: The Revenue Miss That Proves Why This Stock Is Undervalued

Global Partners LP beat Q2 2026 earnings by more than double the consensus estimate while missing revenue by over 10%. The market has spent years punishing this stock for the very characteristic that made the beat possible: it earns on margins, not volume. Shares rose about 3.4% on the day to close around $50, a modest reaction that leaves the stock still woefully discounted versus what its cash flows would warrant.

Let me start with the data that actually matters.

Global Partners reported adjusted EPS of $1.86 per common unit in the second quarter ended June 30, compared to the $0.92 consensus estimate. That is not a rounding error — it is a full dollar of per-unit profit the market did not expect. Net income surged to $71 million, up from $25.2 million a year earlier. Adjusted EBITDA — the earnings-before-interest-taxes-depreciation-and-amortization measure that approximates operating cash generation — rose to $148.2 million from $98.2 million, a 51% jump.

Meanwhile, total revenue came in at $6.8 billion, well below the $7.6 billion that Wall Street models assumed. The miss immediately invites the standard objection: if sales are falling, the business is deteriorating. But Global Partners does not generate profit by moving the most gallons. It generates profit by capturing margin on the gallons it does move.

That is the distinction the market refuses to credit.

Gasoline distribution product margin climbed to $245.2 million from $207.9 million, driven by an increase in fuel margin of $0.50 per gallon versus $0.36 a year earlier. Wholesale product margin rose to $106.5 million from $91.7 million. Commercial product margin nearly doubled to $10.5 million from $6.1 million on favorable bunkering conditions. Total volume was essentially flat at 2.0 billion gallons. The company is not a throughput story; it is a margin capture story. And Q2 proved that the margin capture is accelerating.

From a cash flow perspective, the quarter was even more persuasive. Distributable cash flow — the cash remaining after operating expenses, interest, and maintenance capital expenditures, which is what actually funds the quarterly distribution — reached $92.6 million, up from $52.0 million in Q2 2025. The quarterly distribution of $0.78 per unit works out to roughly $41 million in quarterly payout. That gives a distribution coverage ratio of 2.25x. For context, most midstream MLPs struggle to maintain coverage above 1.4x in volatile quarters. Two-and-a-quarter times coverage means the distribution is not just safe; there is room for growth even if margins normalize modestly.

Maintenance capex for the quarter was $15.9 million, and management guided full-year 2026 maintenance to between $60 million and $70 million. Expansion capex came in at $19.1 million, with full-year guidance of $75 million to $85 million excluding acquisitions. Total annual capex of $135 million to $155 million against trailing-twelve-month free cash flow of roughly $199 million works out to a reinvestment rate below 80%. The business generates more cash than it needs to sustain and grow.

Now let's talk about the balance sheet.

As of June 30, total debt stood at $3.6 billion with cash of $18 million, for net debt of roughly $3.6 billion. The leverage ratio — funded debt divided by trailing twelve months of EBITDA — came in at 2.85x. That is not debt-free, but it is well within the midstream comfort zone. Covenants are not under stress. Liquidity is strong: $174.6 million outstanding on the working capital facility and $103.5 million on the revolver, both well within available capacity.

The move that matters most for balance sheet quality came on July 30, when Global Partners completed the redemption of all 3 million Series B preferred units at $25 per unit, a total cash outlay of $75 million. Those preferred units carried a 9.5% distribution rate. Removing them eliminates a high-cost obligation that sat ahead of common unitholders in the capital structure. CFO Gregory Hanson called it accretive, and the math agrees: common unitholders no longer share earnings with a preferred class that demanded a fixed 9.5% claim on cash flow. On a roughly $220 million annual preferred distribution run rate historically, even a partial redemption like this frees meaningful distributable cash going forward.

While it's true that free cash flow has declined 20% on a trailing twelve-month basis to $199 million, the Q2 print suggests that trend is reversing. The decline was largely driven by lower margins in prior-year comparison periods. This quarter's margin expansion and flat volumes point to the FCF trough having passed.

From a valuation perspective, here is where the disconnect between the data and the price becomes stark.

Global Partners trades at an enterprise value of $3.4 billion against trailing EBITDA, implying an EV/EBITDA multiple of approximately 13.9x. The trailing P/E sits at 13.9x as well. The stock yields roughly 6% on its current distribution rate. Those numbers, standing alone, do not scream bargain for a midstream operator. But context changes the picture.

The stock is up roughly 20% year-to-date but remains below its 52-week high of $53.25. The rolling annual return is slightly negative at -0.65%. Investors have tolerated two years of muted price performance despite the fact that the underlying business is expanding margins, covering its distribution 2.25x, and carrying manageable leverage.

The reason for the discount is predictable: Global Partners is exposed to refined product margins, and those margins have historically been cyclical. The market prices the stock as though tomorrow's backwardation risk — the CFO's warning that a steep backwardation in the forward product pricing curve could increase hedged inventory costs — is a permanent condition rather than a cyclical one. It also prices the stock as though the company is a commodity trader rather than what it increasingly is: an integrated platform that captures margin across distribution, wholesale, and commercial segments regardless of which link in the chain is strongest.

All things considered, the earnings beat tells a different story than the revenue miss. The market expected lower margins and higher volume. It got stable volume and significantly higher margins. For a business whose cash flows depend on margin capture, that is the better outcome. The distribution is covered 2.25x. Leverage is 2.85x. Capex is disciplined. The preferred redemption removes a legacy cost burden. And the stock still carries a 6% yield while trading below its 52-week high.

Even if gasoline margins contract in the second half — and the CFO's backwardation warning is worth taking seriously — the 2.25x coverage ratio provides cushion. A 30% decline in Q2 distributable cash flow would still leave coverage above 1.6x. The distribution survives.

Relative to midstream peers that trade at 9x to 11x EV/EBITDA with lower distribution coverage and higher leverage, Global Partners' combination of margin growth, coverage, and a 6% yield should command at least a multiple in the 11x to 12x range. That would imply a target enterprise value of roughly $4.5 billion to $4.8 billion, or common equity value of $1 billion to $1.2 billion above the current market cap — a re-rating path of 50% to 75% from here if margin durability holds.

Management also noted on the call that the company is "active" in the M&A market. For a firm sitting on strong liquidity and freshly streamlined capital structure, strategic acquisitions that add complementary terminal assets or distribution capacity could accelerate the re-rating.

I reaffirm my Strong Buy rating. The Q2 results do not just meet the case — they strengthen it. The market continues to price Global Partners as a cyclical trader when the margin trajectory, distribution safety, and balance sheet moves are pulling it toward the more predictably rewarded end of the midstream spectrum. The crack between what the data shows and what the price reflects is still wide enough to justify a position.

The upside to peer-average multiples implies 50% to 75% appreciation if cash-flow durability holds through the second half. At a 6% yield and 2.25x coverage, that is a margin of safety most midstream names cannot offer.

The risk to the case is a sustained margin collapse in refined products — the backwardation scenario the CFO flagged, or a broader demand shock that compresses gasoline crack spreads across the board. Even in that scenario, the distribution has room to absorb the hit before being threatened, and the equity price at $50 already reflects a deep skepticism about earnings that the Q2 beat directly contradicts. Cheap with a margin of safety is still the best description of this stock.