Brookfield Infrastructure Partners (BIP 3.35%) was busy last year. The global infrastructure operator closed several transactions and signed agreements on a few more deals that it expects to close this year. Those acquisitions drove strong earnings growth through the third quarter, which should have continued in the year's final period.
That continued growth is one of the many things investors should keep an eye on when the company reports its fourth-quarter results this week.
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1. See if it ended the year as expected
Thanks to a combination of acquisitions and expansion project completions, Brookfield's funds from operations (FFO) rose 16% during the third quarter to $0.82 per unit. It expected to close more deals during the fourth quarter, which led Brookfield to forecast that it would end the year generating an annualized $3.50 per unit of FFO. This outlook implies its fourth-quarter FFO should be around $0.87 per unit.
If that's not the case, then investors should see what caused it to fall short of its expectations. A temporary issue such as a delay in closing one of its transactions wouldn't raise too much of an alarm since it shouldn't have a long-term impact on its performance. However, if the company encounters a deeper issue, such as contract cancellations or lower volumes resulting from a structural change, then it might have a long-term effect on the company's financial results.
2. Check for an update on its data deals
Brookfield agreed to acquire two more data infrastructure businesses at the end of last year, which will boost its results in 2020, provided it closes both deals. The first transaction would see it invest $375 million into the acquisition of a portfolio of communication towers in India. The company has worked with the seller before on another infrastructure transaction, which increases the odds that this one will close without a hitch, provided it receives the necessary regulatory approvals.
The other deal, the proposed acquisition of Cincinnati Bell (CBB), is much less certain. That's because a rival infrastructure fund has offered to acquire Cincinnati Bell for $12 per share in cash, which is above Brookfield's offer of $10.50 per share in cash. While Cincinnati Bell currently plans to support Brookfield's proposal, it might need to increase its bid to seal the deal. Given that uncertainty, investors should see what the company has to say about the transaction when it reports its results this week.
3. See if it has any more deals in the pipeline
Brookfield has been very active in both acquiring new businesses and selling mature ones over the past couple of years. It already added to its acquisition pipeline last quarter by publicly announcing those two data deals in December.
However, more announcements could be forthcoming. The company's CEO, Sam Pollock, stated on the third-quarter conference call that "we're pursuing a robust pipeline of new opportunities, which could lead to another year of outsize investments" in 2020. He added: "We see good opportunities in Asia, in particular, India, [where] there's a banking crisis. And so, people like ourselves who have access to international credit can buy assets there, I think, at [a] good value." On top of that, he said South America looks appealing, as does the North American energy sector. Given those comments, investors should keep an eye out for more acquisition announcements.
Likewise, they should also see if the company has any more asset sales lined up. The company noted during the third quarter that it launched several more sales processes, which could bring in more than $1 billion in cash to help finance additional acquisitions.
Lots to watch this quarter
Brookfield has been busy repositioning its portfolio so that it can grow its FFO at a faster rate in the coming years. That acceleration should be evident in the company's fourth-quarter results this week. In addition to reporting a strong financial quarter, the company is likely to provide investors with an update to all its wheeling and dealing, which would give them a better picture of how fast it can grow this year. If it has lots of good news, then Brookfield's unit price could continue soaring.
