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BIP Misses, Raises Distribution

Zacks Equity Research

Brookfield Infrastructure Partners L.P. (BIP) announced fourth-quarter 2012 operating earnings of 25 cents per unit, 56.9% lower than the Zacks Consensus Estimate of 58 cents. The results of the partnership were a nickel lower than the year-ago earnings.

The partnership’s 2012 operating earnings were 55 cents per unit, down 52.2% from the year-ago earnings of $1.15 per unit. The partnership’s earnings were substantially lower than the Zacks Consensus Estimate of $2.30.

The year-over-year decline in earnings was attributable to higher depreciation and amortization expenses and lower revaluation gain on assets.

Total Revenue

Total revenues at the end of the fourth quarter were $578 million, up 43% from the prior-year quarter, primarily due to a healthy contribution from its Utilities and Transport & Energy segment.

The partnership generated total revenues of $2,004 million in 2012, beating the year-ago figure of $1,636 million by 22.5%.

Highlights of the Release

The partnership’s direct operating costs during the year were $1,094 million, increasing 21.7% from the comparable prior-year period. A similar trend was noticed for general & administrative and depreciation & amortization expenses, which increased 55.7% and 82.7%, respectively from the comparable prior-year period.

During the quarter the partnership completed four previously announced acquisitions and hived off assets which do not form a part of its long-term plans.

The board of directors of Brookfield Infrastructure Partners approved to increase the quarterly cash distribution rate to 43 cents per unit, a 15% increase from 0.375 cents distributed in the previous quarter.

Another Release

Pike Electric Corporation (PIKE) reported earnings of 67 cents per share in the second quarter of fiscal 2013, surpassing the Zacks Consensus Estimate of 25 cents by 168%.

Our View

Brookfield Infrastructure acquired four assets in the fourth quarter. If the company plans for any future acquisition, it can borrow funds at a cheaper rate, thanks to its current BBB+ corporate credit rating.

Although the partnership raised its quarterly distribution rate, rising operating cost is a cause of concern as it constrains the margins.

The partnership currently retains a Zacks Rank #3 (Hold). We presently prefer Ameren Corporation (AEE) and TransAlta Corp. (TAC), both having a Zacks Rank #1 (Strong Buy) and are yet to announce their fourth quarter results.

Based in Hamilton, Bermuda Texas, Brookfield Infrastructure Partners was founded in 2007. The partnership owns and operates infrastructural assets on a global scale. The high quality, long life assets allow the partnership to generate consistent cash flow.

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