According to a recent analysis by Citi analyst Spiro Dounis, Pembina Pipeline Corp (PPL-T) is expected to experience an optimistic cash flow outlook in the coming year due to an improved EBITDA guidance and flow-through impact. The company’s marketing performance has been strong, and management has acknowledged that their EBITDA guidance may have been too conservative. Dounis predicts that Pembina Pipeline Corp will guide at or above their $0.2-0.4 billion EBITDA range in their December annual update.
Looking ahead, Dounis forecasts that Pembina Pipeline Corp will generate an average of $0.7 billion in excess cash flow annually over a multi-year period. This projection excludes the potential purchase of TMX. Based on this valuation, Dounis estimates a 9.7 times multiple on the company’s 2025 estimated EBITDA, representing a 1-times premium to large-cap peers. This reflects the company’s stable cash flows and growth outlook.
In line with these positive projections, Dounis has raised his full-year earnings per share forecast for Pembina Pipeline Corp. For the fourth quarter, he raised the earnings per share forecast by 9 cents to 78 cents, and for the full year, he increased the expectation to $2.71 from $2.54. However, his projections for 2024 and 2025 have decreased slightly to $2.61 and $2.81, respectively.
Maintaining a “neutral” recommendation for Pembina shares, Dounis has raised his target price from $42 to $46. The average target price on the Street is $50.77, according to Refinitiv data.
Overall, Pembina Pipeline Corp is well-positioned for growth with its high-quality and low-carbon projects. However, it already trades at a premium compared to its peers, reflecting its lower risk profile. While the company’s energy transition projects have the potential for new revenue streams, they are still in the early stages and pose execution risks. Nevertheless, Pembina’s strong earnings profile and growth backlog make it an attractive investment option.
What is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company’s operating performance and profitability.
What does it mean to trade at a premium?
When a company’s stock trades at a premium, it means that its share price is higher compared to its peers or the overall market. This can reflect investor confidence in the company’s financial performance and growth prospects.
What are low-carbon projects?
Low-carbon projects refer to initiatives or investments that aim to reduce greenhouse gas emissions and combat climate change. This often involves the development of renewable energy sources and the adoption of energy-efficient technologies.
What is a target price?
A target price is an estimate of a stock’s fair value or the price at which an analyst believes the stock should be trading. It helps investors evaluate the potential upside or downside of a stock and make informed investment decisions.