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.
