Yahoo Finance Inter Pipeline Ltd. Reports Record 2017 Results: Time to Buy?
Inter Pipeline Ltd. (TSX:IPL), one of the largest owners and operators of energy infrastructure assets in western Canada and Europe, released its fiscal 2017 fourth-quarter and full-year earnings results after the market closed on Thursday, and its stock responded by making a slight move to the downside in Friday’s trading session. Let’s break down the earnings results and the fundamentals of its stock to determine if we should be long-term buyers today.
Breaking it all down
Here’s a quick breakdown of 10 of the most notable statistics from Inter Pipeline’s three-month period ended December 31, 2017, compared with the same period in 2016:
Metric | Q4 2017 | Q4 2016 | Change |
Total revenue | $618.3 million | $560.7 million | 10.3% |
Funds from operations | $267.8 million | $254.7 million | 5.1% |
Funds from operations per share | $0.71 | $0.71 | Unchanged |
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) attributable to shareholders | $311.1 million | $283.9 million | 9.6% |
Net income attributable to shareholders | $141.9 million | $125.8 million | 12.8% |
Net income per share (EPS) | $0.37 | $0.35 | 5.7% |
Total pipeline volumes (thousands of barrels per day) | 1,416.3 | 1,372.8 | 3.2% |
Total Natural Gas Liquids (NGL) processing volumes (thousands of barrels per day) | 127.7 | 143.6 | (11.1%) |
Bulk liquid storage utilization rate | 91% | 99% | (800 basis points) |
Dividends declared per share | $0.415 | $0.40 | 3.8% |
And here’s a quick breakdown of 10 notable statistics from Inter Pipeline’s 12-month period ended December 31, 2017, compared with the same period in 2016:
Metric | Fiscal 2017 | Fiscal 2016 | Change |
Total revenue | $2,260.6 million | $1,824.6 million | 23.9% |
Funds from operations | $990.6 million | $848.8 million | 16.7% |
Funds from operations per share | $2.65 | $2.47 | 7.3% |
Adjusted EBITDA | $1,149.1 million | $1,007.7 million | 14.0% |
Net income | $526.7 million | $449.7 million | 17.1% |
Net EPS | $1.41 | $1.31 | 7.6% |
Total pipeline volumes (thousands of barrels per day) | 1,390.6 | 1,296.6 | 7.2% |
Total NGL processing volumes | 118.8 | 111.7 | 6.4% |
Bulk liquid storage utilization rate | 96% | 98% | (200 basis points) |
Dividends declared per share | $1.63 | $1.57 | 3.8% |
Is now the time to buy Inter Pipeline?
The fourth quarter was outstanding overall for Inter Pipeline, and it capped off a year to remember for the company, highlighted by record funds from operations, net income, and average pipeline throughput volume per day. With its very strong results in mind, I think its stock should have reacted by soaring on Friday; furthermore, I think the stock represents a very attractive long-term investment opportunity today for two primary reasons.
First, it’s undervalued. Inter Pipeline’s stock currently trades at just 16.2 times fiscal 2017’s EPS of $1.41 and only 14.6 times the consensus EPS estimate of $1.56 for fiscal 2018, both of which are inexpensive compared with its five-year average multiple of 23.2 and its long-term growth potential; these multiples are also inexpensive given its very strong cash flow-generating ability due to 77% of its EBITDA coming from cost-of-service and fee-based contracts.
Second, it has a high and safe dividend yield with an impressive track record of growth. Inter Pipeline currently pays a monthly dividend of $0.14 per share, representing $1.68 per share annually, which gives it a massive 7.4% yield. It’s also important to note that the infrastructure giant’s 3.7% dividend hike in November has it on track for 2018 to mark the 10th straight year in which it has raised its annual dividend payment, and I think its very strong financial performance will allow this streak to continue for many years to come.
With all of the information provided above in mind, I think all Foolish investors should strongly consider initiating long-term positions in Inter Pipeline today.
More reading
Aurora Cannabis: Notable Takeaways From the Latest Financial Results
Bargain Hunting: Is This Market Sell-Off Just What You've Been Waiting for?
Fool contributor Joseph Solitro has no position in any of the stocks mentioned.
