Plains All American Pipeline L.P. ( PAA - Analyst Report ) reported a positive earnings surprise of 12.9% in its first quarter 2012, which stretched its surprise streak to seven straight quarters. Units of this Zacks #1 Rank (Strong Buy) pipeline operator hit their 52-week high on July 20.

Strong Start to the Year

On May 7, Plains All American Pipeline reported first quarter earnings of $1.58 per limited partner unit, beating the Zacks Consensus Estimate of $1.40 and the year-ago earnings of $1.03.

Total revenue for the partnership grew 21.0% year over year to $9.2 billion due to solid performances from all three reporting segments.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 35.6% year over year to $472.0 million, driven by higher-than-estimated pipeline volumes.

The growth in revenue mitigated a 20.1% surge in total cost due to rise in purchases and field operating cost, resulting in operating income growth of 9.8% year over year to reach $313.0 million.

The partnership also rewarded unitholders by increasing its quarterly cash distribution rate to $1.065 per unit, which grew 8.4% year over year and 1.9% sequentially.

For 2012, net income is projected in the range of $1,045 million to $1,197 million or $4.65 to $5.57 per unit. The partnership expects second quarter 2012 net income in the range of $263 million to $312 million or $1.17 to $1.46 per unit. Plains Pipeline will report its second-quarter financial results on August 6.

Estimate Revision

In the last 90 days, the Zacks Consensus Estimate for 2012 moved higher by 11.2% to $4.98 per unit, while the Zacks Consensus Estimate for 2013 increased 6.3% to $4.87 per unit.

Attractive Valuation

Plains All American Pipeline is presently trading at a discount to its peers with respect to P/E. It has a forward P/E of 17.4x, down 22.0% from the peer group average of 22.3x. The return on equity (ROE) of 19.2% looks attractive compared with the peer group average of 12.1%.

Market Performance & Technicals

The chart below depicts the full story, with the stock rising steadily and adding 13.6% from $73.65 per unit to the present level of $86.57 per unit in just six months.

Following the strong first quarter results, units have been trading higher than its 200-day moving average. Volume is fairly strong, averaging roughly 504K daily. The year-to-date return for the stock came in at 17.8%, much above the S&P 500’s return of 6.4%.

Based in Houston, Texas Plains All American Pipeline L.P. – a master limited partnership – was founded in 1998. The partnership is engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas and other natural gas-related petroleum products in North America. The partnership has 3,800 full time employees and a market cap of nearly $14 billion. It competes with ONEOK Partners, L.P. (OKS) and Enterprise Products Partners L.P. (EPD) among others.