Brookfield Infrastructure Partners L.P. Earnings Show the Power of Investing Against the Headlines

By Matthew

Economic headlines seem to change with the passing of each season with today's worry turning into tomorrow's opportunity. However, one thing remains constant: the critical role infrastructure plays in supporting the global economy. That is why Brookfield Infrastructure Partners continues to take advantage of today's worry by seeking to acquire critical infrastructure assets around the globe so that it can earn strong returns when that worry fades and everyone else notices the opportunity. That's the backdrop that really frames the company's third-quarter report, which was released before markets opened on Wednesday.

Current results: Yesterday's worry is today's valueWhile the whole world was worried about the collapse of the global financial system during the financial crisis, Brookfield Infrastructure Partners was looking for opportunities to capture value. It was during that time that the company acquired many of that assets that are driving value today, providing a strong foundation for its current results.

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Those result were solid with the company generating funds from operations, or FFO totaling $210 million, or $0.91 per share during the quarter. That's up from the $178 million, or $0.85 per share it earned in the year-ago quarter. Here's a breakdown of FFO by segment:

Data Source: Brookfield Infrastructure Partners.

In its earnings report Brookfield noted that the growth or stability of each of the first three segments was largely due to assets it acquired during the financial crisis. For example, a big driver of the increase in the Utilities segment was record connections at its UK regulated distribution operation. Meanwhile, the Transport segment benefited from cost savings at the company's Australian rail operation, while the Energy segment enjoyed increased volumes on its North American gas transmission operations, both of which were acquired in that same deal.

In addition to the benefits from that legacy deal, Brookfield also cashed on in some more recent acquisitions, which added to its growth in the quarter. Most notably was its recent acquisition of a French telecom infrastructure business, which added $20 million to FFO during the quarter. Meanwhile, its district energy businesses fueled part of the gain in its Energy segment, while its Brazilian rail business boosted its Transport segment. That segment's results would have been even more robust, but it was weighed down by the strong U.S. dollar, which had a $20 million impact on that segment's results.

Future outlook: Today's worry is tomorrow's valueJust as it has done in the past, Brookfield Infrastructure Partners is taking advantage of the worrisome headlines of today to capture value for tomorrow by making acquisitions across the globe. Topping the list is the A$12 billion agreement that Brookfield and its institutional partners, led by parent Brookfield Asset Management , have in place to acquire Australian rail and port logistics company Asciano. It's an acquisition that's being made at a time when global trade is slowing due to weakness in China, which is having a negative impact on Australia's economy. However, Brookfield is looking past the headlines because it sees a high quality company that would be a perfect fit for its global infrastructure portfolio.

Likewise, it's taking advantage of headlines that suggest that India isn't a great place to invest and instead is buying a portfolio of six roads in the country to expand its global toll road platform. Meanwhile, it's unafraid of the energy market downturn, which is why it joined with a Brookfield consortium to acquire a natural gas storage company that was selling for a deep discount to its value.

Finally, with China slowing it is impacting other emerging market economies, with Brazil being particularly hard hit due to weakening sales of iron ore. That weakness, however, opened up the door for Brookfield to provide debtor in possession financing to a large construction company, which owns a stake in a toll road, airport, and urban mobility company. It's that stake that Brookfield is after because it believes this company will benefit from future growth in Brazil once the current headline worries subside.

Investor takeawayBrookfield's third quarter report was solid, with the company benefiting from a foundation it laid years ago, which it has built upon with more recent acquisitions. The company is currently in the process of building another foundation for future growth by taking advantage of the current headlines to acquire compelling infrastructure assets around the globe. These deals, which are all expected to close by early next year, should deliver significant near-term value for investors, to go along with substantial potential for future value creation once the worries fade.

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Matt DiLallo owns shares of Brookfield Asset Management and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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