Brookfield Infrastructure Renews Its Normal Course Issuer Bids

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In a strategic move, Brookfield Infrastructure Partners L.P. (BIP) and Brookfield Infrastructure Corporation (BIPC) have renewed their normal course issuer bids, authorizing the repurchase of a significant number of units and shares. This decision, announced on November 27, 2024, signals the companies' confidence in their respective units' undervalued status and their commitment to capital return and value creation for shareholders.

BIP has been authorized to repurchase up to 23,088,572 limited partnership units (LP Units), representing 5% of the outstanding units, and specified amounts of Preferred Units across four series. BIPC, on the other hand, can repurchase up to 11,889,600 class A exchangeable subordinate voting shares (Exchangeable Shares), which accounts for 10% of the public float. The period for these repurchases will run from December 2, 2024, to December 1, 2025.

This decision may be driven by several factors, including current market conditions, the companies' strong financial performance, and regulatory environments. The S&P 500 has experienced a decline of 21.3% year-to-date (as of November 28, 2024), and interest rates remain at historical lows. This could provide an opportunity for BIP and BIPC to capitalize on undervalued stock prices. With a 24.29% increase in revenue and stable earnings in 2023, BIP's financial health supports its authorization to repurchase up to 5% of its outstanding LP Units and specified amounts of preferred units. The supportive regulatory environment, as demonstrated by the Toronto Stock Exchange's (TSX) approval of the repurchase amounts, also plays a crucial role in the decision.

Furthermore, the implementation of automatic share purchase plans suggests an efficient approach to executing these repurchases. This proactive strategy enhances execution efficiency, ensuring that repurchases occur even during periods when management might otherwise be restricted from trading.

The renewed normal course issuer bids signify management's confidence in their respective units' undervalued status. By repurchasing shares, BIP and BIPC aim to boost earnings per share (EPS) by reducing the number of outstanding shares, potentially leading to an increase in stock price. This capital return strategy can signal management's belief in the company's intrinsic value and its future business prospects.

However, it is essential to note that the actual repurchase amount will depend on management's belief that the units or shares are undervalued. The lack of unit repurchases under their current programs suggests that the authorization serves more as a strategic tool than an immediate capital return mechanism. Nevertheless, analysts' average rating for BIP stock is "Strong Buy," with a 12-month stock price forecast of $37.5, indicating a 6.08% increase from the latest price.

In conclusion, Brookfield Infrastructure Partners and Brookfield Infrastructure Corporation's renewal of their normal course issuer bids reflects a strategic capital allocation decision. This move signals management's confidence in their respective units' undervalued status and their commitment to capital return and value creation for shareholders. As the market and regulatory environments continue to evolve, it will be interesting to observe how these bids play out and their impact on the companies' future financial performance and stock prices.