Shares of infrastructure service provider
Macquarie Infrastructure Company LLC
) scaled a 52-week high of $69.00 on Jul 12, before closing the
trading session a notch lower at $68.92 for a modest one-year
return of 22.7%. Despite its strong price appreciation, this Zacks
Rank #3 (Hold) stock has the wherewithal to continue its growth
curve. The stock is currently trading at a forward P/E of 47.5x and
has long-term earnings growth expectation of 7.0%.
Macquarie recently diversified its business by acquiring wind power
generating assets in New Mexico from BayWa r.e. Wind, LLC for $10.6
million This is the first investment by Macquarie in the field of
wind power generation as it aims to diversify its Contracted Power
and Energy segment from solar photovoltaic business into other
projects that focus on renewable and unconventional sources of
energy. The facility, capable of generating 19.8 megawatts of wind
power, offers a steady revenue stream to Macquarie as it has a
20-year power purchase agreement in place with an investment grade
Macquarie also inked a definitive agreement to acquire the
remaining 50% stake of International-Matex Tank Terminals that
operates 12 bulk liquid storage terminal facilities in North
America. The transaction, worth over $1 billion ($910.0 million in
cash and $115.0 million in stock), equates to International-Matex's
enterprise value of 10.7x trailing 12-month EBITDA of $279.6
By purchasing the remaining stakes in the company from the founders
of the business, Macquarie will gain full ownership control of
International-Matex to strengthen its stable, largely contracted
revenue based business model. Macquarie also intends to implement
better controls and processes for expense management and capital
expenditure maintenance and leverage International-Matex's
consolidated procurement capability to gain added mileage.
The transaction is expected to be accretive to Macquarie's Free
Cash Flow in 2014, increasing 11.2% year over year to $4.55 per
share (excluding transaction-related expenses). Macquarie also
introduced Free Cash Flow guidance for 2015 at $5.10 per share,
representing year-over-year growth of 12.1%. Since 2007, Free Cash
Flow per share in the company has grown by 12.3% each year on an
Macquarie intends to distribute this cash as dividends as it
targets a payout between 80% and 85% of the Free Cash Flow.
Macquarie immediately raised its second-quarter 2014 dividend to 95
cents per share or $3.80 annualized, up 1.3% year over year. For
additional liquidity, Macquarie also put in place a $250.0 million
revolving credit facility.
All these measures instilled higher investor confidence,
catapulting the stock to a 52-week high.
Other Stocks to Consider
Some better-ranked stocks in the industry include
United Technologies Corp.
Compass Diversified Holdings
), each of which carry a Zacks Rank #2 (Buy).
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UTD TECHS CORP (UTX): Free Stock Analysis
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MACQUARIE INFRA (MIC): Free Stock Analysis
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