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Why Pembina Pipeline Corp. Is Rallying Over 4%

Pembina Pipeline Corp. (TSX:PPL)(NYSE:PBA), one of North America’s largest owners and operators of energy infrastructure, announced its fiscal 2017 fourth-quarter and full-year earnings results after the market closed yesterday, and its stock has responded by rallying over 4% at the open of today’s trading session. Let’s break down the results and the fundamentals of its stock to determine if now is the time to buy.

A record financial performance  

Here’s a quick breakdown of eight of the most notable statistics from Pembina’s three-month period ended December 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Revenue $1,716 million $1,251 million 37.2%
Net revenue $709 million $514 million 37.9%
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) $674 million $342 million 97.1%
Adjusted cash flow from operating activities $499 million $292 million 70.9%
Adjusted cash flow from operating activities per common share $0.99 $0.74 33.8%
Earnings $445 million $131 million 239.7%
Diluted earnings per common share (EPS) $0.83 $0.28 196.4%
Total volume – thousands of barrels of oil equivalent per day (mboe/d) 2,917 1,941 50.3%

And here’s a quick breakdown of eight of the most notable statistics from Pembina’s 12-month period ended December 31, 2017, compared with the same period in 2016:

Metric Fiscal 2017 Fiscal 2016 Change
Revenue $5,408 million $4,265 million 26.8%
Net revenue $2,246 million $1,764 million 27.3%
Adjusted EBITDA $1,705 million $1,189 million 43.4%
Adjusted cash flow from operating activities $1,396 million $986 million 41.6%
Adjusted cash flow from operating activities per common share $3.27 $2.54 28.7%
Earnings $891 million $466 million 91.2%
Diluted EPS $1.88 $1.01 86.1%
Total volume – (mboe/d) 1,705 1,189 43.4%

Is now the time to buy?

The fourth quarter capped off a transformational year for Pembina, in which it completed its strategic acquisition of Veresen and placed $4.8 billion of projects into service, and this led to record fourth-quarter and full-year adjusted EBITDA, adjusted cash flow, and adjusted cash flow per share for the company; with its record performance in mind, I think the large pop in its stock is warranted, and I think it’s still a great buy today for two fundamental reasons.

First, it’s still undervalued. Even after the +4% pop, Pembina’s stock trades at just 22.8 times fiscal 2017’s diluted EPS of $1.88 and only 20.3 times the consensus EPS estimate of $2.11 for fiscal 2018, both of which are very inexpensive given its current earnings-growth rate and its long-term growth potential; these multiples are also inexpensive compared with its five-year average multiple of 36.8.

Second, it has one of the best dividends in the energy sector. Pembina currently pays a monthly dividend of $0.18 per share, representing $2.16 per share annually, which gives it a juicy 5% yield. Investors must also note that the infrastructure giant’s 5.9% dividend hike in November has it on track for 2018 to mark the seventh straight year in which it has raised its annual dividend payment, making it both a high-yield and dividend-growth play.

With all of the information provided above in mind, I think all Foolish investors seeking exposure to the energy sector should strongly consider beginning to scale in to long-term positions in Pembina Pipeline today.

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Fool contributor Joseph Solitro has no position in any stocks mentioned. Pembina is a recommendation of Dividend Investor Canada.

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