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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.
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.
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 500s 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.