Critical Survey: Southcross Energy Partners (SXE) vs. Pembina Pipeline (PBA)

Southcross Energy Partners (NYSE: SXE) and Pembina Pipeline (NYSE:PBA) are both oils/energy companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, valuation, risk, earnings, analyst recommendations, dividends and institutional ownership.

Earnings & Valuation

This table compares Southcross Energy Partners and Pembina Pipeline’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Southcross Energy Partners $548.72 million 0.22 -$94.94 million ($1.21) -1.28
Pembina Pipeline $3.22 billion 5.47 $351.92 million $0.99 35.42

Pembina Pipeline has higher revenue and earnings than Southcross Energy Partners. Southcross Energy Partners is trading at a lower price-to-earnings ratio than Pembina Pipeline, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Southcross Energy Partners has a beta of 4.01, meaning that its share price is 301% more volatile than the S&P 500. Comparatively, Pembina Pipeline has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500.

Dividends

Pembina Pipeline pays an annual dividend of $1.70 per share and has a dividend yield of 4.8%. Southcross Energy Partners does not pay a dividend. Pembina Pipeline pays out 171.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Southcross Energy Partners has raised its dividend for 3 consecutive years.

Profitability

This table compares Southcross Energy Partners and Pembina Pipeline’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southcross Energy Partners -13.74% -16.59% -7.83%
Pembina Pipeline 11.66% 8.36% 3.65%

Insider & Institutional Ownership

3.1% of Southcross Energy Partners shares are held by institutional investors. Comparatively, 42.5% of Pembina Pipeline shares are held by institutional investors. 23.8% of Southcross Energy Partners shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Southcross Energy Partners and Pembina Pipeline, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southcross Energy Partners 0 1 0 0 2.00
Pembina Pipeline 0 1 4 0 2.80

Pembina Pipeline has a consensus target price of $44.00, indicating a potential upside of 25.46%. Given Pembina Pipeline’s stronger consensus rating and higher possible upside, analysts clearly believe Pembina Pipeline is more favorable than Southcross Energy Partners.

Summary

Pembina Pipeline beats Southcross Energy Partners on 12 of the 16 factors compared between the two stocks.

About Southcross Energy Partners

Southcross Energy Partners, L.P. provides natural gas gathering, processing, treating, compression and transportation services and natural gas liquid (NGL) fractionation and transportation services. The Company also sources, purchases, transports and sells natural gas and NGLs. Its assets are located in South Texas, Mississippi and Alabama As of December 31, 2016, its assets consisted of gathering systems, intrastate pipelines, two natural gas processing plants, one fractionation facility, 20 compressor stations and a treating system. Its gathering systems and intrastate pipelines include South Texas and Mississippi/Alabama. The assets in its South Texas region are located between Montgomery County, which is north of Houston, and Webb and Dimmit Counties near the Texas-Mexico border. The assets in its Mississippi region are located principally in the southern half of the state and consist of intrastate pipeline system in Mississippi.

About Pembina Pipeline

Pembina Pipeline Corporation is an energy transportation and service provider. The Company operates through four segments. The Conventional Pipelines segment consists of the tariff-based operations of pipelines and related facilities to deliver crude oil, condensate and natural gas liquids (NGL) in Alberta, British Columbia, Saskatchewan, and North Dakota, United States. The Oil Sands & Heavy Oil segment consists of the Syncrude, Horizon, Nipisi and Mitsue Pipelines, and the Cheecham Lateral. These pipelines and related facilities deliver synthetic crude oil produced from oil sands under long-term cost-of-service arrangements. The Gas Services segment consists of natural gas gathering and processing facilities. The Midstream segment consists of the Company’s interests in extraction and fractionation facilities, terminalling and storage hub services under a mixture of short, medium and long-term contractual arrangements.

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