Brookfield Infrastructure Partners (NYSE:BIP) has grown at an above-average pace over the years, driven mainly by a steady stream of acquisitions. However, the company hit a speed bump in the middle of 2018 after it sold an electricity transmission business in Chile (Transelec), which put its earnings growth in reverse. That situation should only be temporary, though, since the global infrastructure giant had several more transactions in the pipeline.
Its reacceleration should have begun to take hold in the fourth quarter, and evidence of that is one of several things investors should be looking for when the company reports its results later this week.
1. Signs of an earnings-growth rebound
After surging during the first quarter, Brookfield Infrastructure Partners' funds from operations declined in both Q2 and Q3, due mainly to the $1.3 billion sale of Transelec. However, the company quickly lined up several transactions that should boost its results.
Brookfield closed a couple of those deals before the end of 2018. In early October, the company completed the first phase of its deal with Canadian energy infrastructure giant Enbridge (NYSE:ENB), investing $280 million into a natural gas gathering and processing business in Western Canada. Brookfield followed that up a few weeks later by completing the $660 million buyout of residential infrastructure company Enercare. These new investments should offset some of the impact from the sale of Transelec; it's likely that the company returned to growth mode during Q4. If that turns out not to have been not the case, investors will want to know what specifically weighed on its results.
2. Progress on closing its acquisitions
Brookfield had several more deals in the pipeline that should close in the coming months. In late December, partner Digital Realty completed an acquisition of data centers in Brazil. The second stage of that transaction should close in the first quarter of this year when the two company's finalize their joint venture agreement: Brookfield is expected to invest $200 million in that deal.
Meanwhile, in early January, Brookfield sealed a strategic alliance with AT&T under which it invested in several of the telecom giant's data centers. Finally, Brookfield also expects to close the second phase of its Enbridge transaction by mid-year, and complete its acquisition of a natural gas pipeline business in India.
These final few transactions will significantly boost the company's 2019 results, and also give it fuel to grow at a faster pace. Given their importance to Brookfield's strategic plans, investors should look for indications in the report that the company is on track to close all these deals on schedule.
3. News of more transactions
Brookfield is in the midst of refreshing its portfolio. Part of that strategy is to continue selling mature assets like Transelec, and the company is working on its next phase of asset sales. It has set a goal of raising another $500 million to $1 billion in cash over the next six to 12 months -- money it will then redeploy into higher returning opportunities.
So naturally, the company has been on the prowl for its next acquisitions. The infrastructure giant noted last quarter that it sees a huge opportunity in the North American oil and gas midstream sector for deals similar to the one it inked with Enbridge, where it takes advantage of a company's need for capital to buy assets with lots of upside potential. Given that this is Brookfield's stated intention, investors will want to know if the company has been able to line up another deal.
Check out the latest Brookfield Infrastructure earnings call transcript.
Full speed ahead
With a few new investment deals completed, Brookfield Infrastructure appears poised to deliver news of its return to financial growth in Q4 2018. Meanwhile, with several more deals in the works, and additional portfolio reshuffling ahead, Brookfield's growth rate should re-accelerate in the coming year. The company looks set for a return to its market-beating ways, as long as nothing major derailed its progress last quarter.