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Strong Buy on Pembina Pipeline

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On Aug 13, Zacks Investment Research upgraded Pembina Pipeline Corp. (PBA - Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

This company provides transportation and midstream services to oil and natural gas operators in North America.  The company delivered positive earnings surprises in two out of the last three quarters with an average beat of 21.8%.

Pembina Pipeline’s earnings per share in the second quarter were 29 cents, 20.1% higher than the Zacks Consensus Estimate and ahead of the year-ago figure by a penny.

The company continues to make consistent investment to improve its operations and existing infrastructure. The capital expenditure of Pembina Pipeline in the first half of 2013 was $359.8 million, 93.1% higher than the prior-year period. The expenditure was primarily directed towards its Conventional Pipelines, Gas Services and Midstream businesses.

Pembina Pipeline recently invested $110 million in a shallow cut gas plant, Musreau II, near its existing Musreau facility in central Alberta. Musreau II is expected to be in service in the first quarter of 2015 and take Pembina Pipeline’s daily processing capacity to approximately 1.2 billion cubic feet.

During the first six months of 2013, Pembina has secured $1.5 billion in capital projects, which will help provide long-term and sustainable returns to its investors. Pembina Pipeline raised its current monthly dividend rate to 14 cents, reflecting a 3.7% sequential increase from 13.5 cents distributed in the previous month.

The Zacks Consensus Estimate for 2013 is pegged at $1.13 per share, reflecting year-over-year growth of 5.61%. For 2014, the Zacks Consensus Estimate of $1.27 per share projects year-over-year growth of 12.39%.

Besides Pembina Pipeline Corporation, other operators in the sector having a favorable Zacks Rank are Magellan Midstream Partners L.P. (MMP - Free Report) , Cabot Oil & Gas Corp. (COG - Free Report) and Range Resources Corp. (RRC - Free Report) . All of them presently carry a Zacks Rank #1 (Strong Buy).

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