Why Parkland Fuel Corp. Jumped 4.89% on Friday

Parkland Fuel Corp. (TSX:PKI) rallied 4.89% on Friday following its Q3 earnings release. Can the rally continue? Let’s find out.

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Parkland Fuel Corp. (TSX:PKI), Canada’s largest independent marketer of fuel and petroleum products and its second-largest convenience store operator, watched its stock rally 4.89% on Friday following the release of its third-quarter earnings results. The stock still sits more than 18% below its 52-week high of $32.45 reached back May, so let’s break down the quarterly results to determine if this could be the start of a sustained rally higher.

The results that ignited the rally

Here’s a quick breakdown of 10 of the most notable financial statistics from Parkland’s three-month period ended September 30, 2017, compared with the same period in 2016:

Metric Q3 2017 Q3 2016 Change
Sales and operating revenue $2,600.6 million $1,638.1 million 58.8%
Adjusted gross profit $266.3 million $171.1 million 55.6%
Adjusted EBITDA $96.4 million $60.3 million 59.9%
Net earnings $12.7 million $14.7 million (13.6%)
Earnings per diluted share (EPS) $0.10 $0.15 (33.3%)
Adjusted distributable cash flow (ADCF) $65.3 million $33.2 million 96.7%
ADCF per share $0.50 $0.35 42.9%
Fuel and petroleum product volume (million litres) 3,556.6 2,658.6 33.8%
Total assets $4,825.1 million $2,424.0 million 99.1%
Weighted-average number of common shares outstanding (millions) 130.5 95.6 36.5%

What should you do now?

It was a phenomenal quarter overall for Parkland, highlighted by record adjusted EBITDA of $96.4 million, and these results were driven by its acquisitions of CST Brands’s Canadian assets and Chevron’s downstream gasoline retailing business, as well as “strong organic growth” in its base businesses across all segments. That being said, I think the market responded correctly by sending Parkland’s stock higher in Friday’s trading session, and I think will continue higher from here as investors continue to pile in to gain exposure to one of North America’s fastest-growing companies.

It’s highly important to note that Parkland is a dividend aristocrat, which will help attract investors as well. It currently pays a monthly dividend of $0.09617 per share, equating to $1.154 per share on an annualized basis, which gives its stock a lavish 4.3% yield. Foolish investors must also note that the company’s 4.8% dividend hike in March has it on track for 2017 to mark the fifth consecutive year in which it has raised its annual dividend payment, and I think its very strong growth of ADCF will allow this streak to easily continue into the 2020s.

With all of the information provided above in mind, I think all Foolish investors should strongly consider making Parkland a long-term core holding.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in the companies mentioned.

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