Three more Canadian Edge Portfolio recommendations reported earnings this week. All three posted numbers that solidly covered current distributions, affirmed balance-sheet strength and underscored the long-run strength of their businesses.

As a result, all three continue to rate strong buys for anyone who doesn’t already own them.

ARC Resources Ltd (TSX: ARX, OTC: AETUF), as expected, sold its natural gas output at an average price 10.4 percent below what it did in the fourth quarter of 2010. The big surprise was just how negligible the impact on fourth-quarter and full-year 2011 results was.

Instead, the company posted funds from operations of CAD0.79 per share, up 25.4 percent from last year. That covered the distribution of CAD0.10 cents Canadian per month by a mammoth 2.63-to-1 margin; the payout ratio was 38 percent). Full-year 2011 funds from operations rose 16.6 percent to CAD2.95 per share, for a coverage ratio of 2.46-to-1 and a payout ratio of 40.7 percent.

Once again, the keys for ARC were surging production and robust pricing for liquids. Fourth-quarter output averaged 92,021 barrels of oil equivalent a day, up 8.7 percent from a year ago and 8 percent sequentially from the third quarter of 2011. Realized crude oil (31 percent output) prices were CAD92.85 per barrel, up 22 percent. Condensate prices soared to CAD101.13 per barrel, a jump of 29 percent. And natural gas liquids prices surged 28 percent.

Dry natural gas production (up 14.1 percent by volume) continues to contribute the lion’s share of output at 64.3 percent. But ARC’s ability to delve into low-cost reserves, improve efficiencies and profit from high liquids prices continues to offset price weakness.

This could be put to a test in early 2012, as gas prices have plunged further. But even at a smaller percentage of volume, crude oil and liquids currently account for 71 percent of ARC’s commodity sales. And they remain the focus of the company’s capital program (CAD726 million in 2011), which added 8 percent to proven reserves last year and stretched reserve life based solely on proven reserves to 10.7 years.

ARC’s strong full-year performance was achieved in spite of flooding and fires that interrupted output and development in the second quarter of 2011. And the company was able to do it while holding debt to just 11 percent of total capital and 1.1 times annualized cash flows. There are no debt maturities until Aug. 3, 2015, when a CAD1 billion credit line matures (CAD319.9 million currently drawn).

Management’s development goals and uncertainty about energy prices probably rules out a dividend increase this year. But with a solid and growing reserve base and on track for continued production gains in 2012, ARC Resources is a strong buy up to USD25 for anyone who doesn’t already own it. If energy prices do surprise to the upside, this stock will as well.

Cineplex Inc’s (TSX: CGX, OTC: CPXGF) full-year theater attendance dropped 4.2 percent due to a generally disappointing movie lineup versus 2010. Overall revenue, however, slipped just 0.8 percent, as the company continued to build its base of value-added products and services.

Cash flow rose 3.2 percent, and cash flow margin–as a percentage of revenue–rose to 17.3 percent from 16.7 percent in the year-earlier period. The company actually posted positive revenue growth in the fourth quarter, despite a 4.1 percent drop in attendance. Cash flow surged 9.2 percent, and cash flow margin rose by 130 basis points.

The bottom-line figure, adjusted free cash flow per share, was 23.6 percent lower in the fourth quarter and 12.4 percent off for the year. That raised the fourth-quarter payout ratio to 90.3 percent and the full-year ratio to 65.6 percent. The shortfall, however, was largely expected, as Cineplex absorbed income taxes for the first time. Absent this cash flow showed solid gains.

CEO Ellis Jacob pronounced the results affirmation of the company’s successful strategy to reduce dependence on often volatile trends in attendance. That’s included moves to boost media revenue–up 11.2 percent last year despite a “challenging” environment–expanding its “SCENE” loyalty program and enhancing theater capability with digital projection systems for IMAX and 3D cinema.

All of this is showing up in record annual box office revenue per patron. And with 476 new digital projectors and 30 RealD 3D systems installed during the year–as well as 12 UltraAVX auditoriums and new theaters in suburban Toronto and British Columbia–the trend is set to continue in 2012. The company also raised annual concession revenue per patron to a record, purchased its distributor/supplier of arcade games and launched several media, alternative programming and interactive media initiatives.

Cineplex’ ability to generate these results is particularly impressive in light of the fact that no film in the fourth quarter of 2011 came close to having the impact Harry Potter and the Deathly Hallows Part 1 did in the fourth quarter of 2010. And 2010 also included the blockbuster hit Avatar as well as Alice in Wonderland, Inception and Toy Story 3. By contrast, the best 2011 had to offer was the less impressive Harry Potter and the Deathly Hallows Part 2, Pirates of the Caribbean 4 and The Hangover 2.

There is the matter of growing competition from Empire Co Ltd (TSX: EMP/A, OTC: EMLAF), which has announced construction of new theaters this year. These results, however, confirm that innovative Cineplex is finding ways to build its business despite these challenges. Moreover, preliminary indications are for a rebound in attendance in 2012. During the company’s fourth-quarter conference call Mr. Jacob noted “the Canadian industry box office is 11.3 percent share of prior years” total for North America for the first five weeks of 2012, up from a normal range of 8 to 11 percent.

This year’s only debt maturity is a convertible bond with a conversion value that’s nearly 40 percent higher than the cash redemption value. As a result it’s likely to be converted into shares and involve no cash outlay. Following this there are no maturities until a credit line comes due Sept. 18, 2016.

On track for another increase in its monthly dividend increase this spring, Cineplex is a buy up to USD26.

Just Energy Group Inc’s (TSX: JE, NYSE: JE) fiscal 2012 third-quarter (end Dec. 31) results should banish any worries that crashing natural gas prices are hurting its ability to attract and hold new customers.

Rather, management reported record customer additions of 310,000. This pace was 30 percent faster than the fiscal second-quarter (end Sept. 30) and left the company with 10 percent more customers than three months ago. Net additions–which include attrition of expiring contracts–were up 115,000, or 156 percent, from the second quarter.

The implication: If anything, Just Energy had an easier time keeping and holding new customers, both organically and with acquisitions, in the most recent quarter than it did the prior one.

Primary measures of profitability were also stronger. Margin rose 9 percent, indicating the company is adding users in a way that adds to earnings, rather than as a loss leader to gain scale. Adjusted cash flow per share–the primary metric for which management sets dividend policy–rose 18 percent for the fiscal year to date, and it rose 12 percent in the fourth quarter.

The payout ratio for the quarter fell to just 50 percent based on that figure, the third consecutive quarter it’s dropped from year-earlier totals. It came in at just 75 percent for the fiscal year to date, a sharp drop from 88 percent in the prior year. And it reflects results that continue to beat management’s prior guidance for margin and cash flow growth of 5 percent for the current fiscal year.

To be sure, Just Energy does face pressures from falling gas prices, which have also reduced the wholesale price of electricity. Low heating and power rates reduce consumers’ desire to switch to alternate providers like Just Energy. They also make it more difficult to hold customers when existing contracts expire.

Worries that Just Energy would be unable to respond to these challenges have underscored the bear case against the stock for the past year. They’re the clear reason the shares took such a wicked hit last year and still yield nearly 10 percent. And they’re likely to remain a concern at least for the first half of calendar 2012.

It’s quite possible even these results won’t mollify the company’s critics. But it is very clear that management is doing a lot of things right to turn an otherwise difficult environment to its advantage. That includes the now successfully completed acquisition of Texas energy marketer Fulcrum, an immediately accretive deal that adds expertise in affinity sales. The JustGreen product remains very successful and waterheater and HVAC rental and sales increased installations by 39 percent in the fiscal third quarter over the prior quarter’s rate.

The per share growth target for gross margin and bottom-line adjustable cash flow per share is still 5 percent for fiscal 2012, which will wind up Mar. 31. That’s well below what’s been achieved so far, and it sets the stage for a major full-year beat.

As for the balance sheet, the next scheduled maturity isn’t until Dec. 31, 2013, when a CAD350 million credit facility must be rolled over. Only CAD63 million of that is currently drawn, however, an amount equal to just 3.4 percent of Just Energy’s current market capitalization and less than the company’s cash in the bank.

Given management’s conservative projections and policies, I’m not expecting a dividend increase in the near future. But with Chair Rebecca MacDonald affirming the “business model and dividend policy are sound,” the existing rate looks safer than ever. And with the stock now listed on the New York Stock Exchange (NYSE) and starting to get the attention of investors in the US, that’s almost surely all it’s going to take for Just Energy to score a strong total return this year.

Thus far in 2012 the stock has returned about 15 percent in US dollar terms, a sharp improvement on last year’s negative return of 17.7 percent, which would have been far worse were it not for sharp gains posted the last two weeks of December. But it still leaves the January 2012 High Yield of the Month and longtime Conservative Holding trading well below my buy target of USD16. Just Energy is a solid bargain for anyone light on it.

Numbers to Come

Here’s when to expect the next round of numbers of Canadian Edge Portfolio Holdings. Note that Shaw Communications (TSX: SJR/B, NYSE: SJR) reported its earnings on Jan. 12 and I highlighted them in a Flash Alert later that day. Acadian Timber Corp (TSX: ADN, OTC: ACAZF) was reviewed in a Feb. 7 Flash Alert. You can click on the links next to their names in the list below to review those writeups.

I’ll be reporting my analysis of these companies in Flash Alerts over the coming weeks as they appear, as well as in the regular March issue of Canadian Edge. Note that these are full-year as well as fourth-quarter results for the vast majority, which accounts for the extraordinary length of this reporting season. As many as a dozen companies, for example, may not report in time for the March issue, which will be posted on Friday, Mar. 9.

As for the rest of the Canadian Edge coverage universe, I won’t send Flash Alerts. Rather, I’ll  recap those that have reported by Mar. 9 in the  March CE, along with payout ratios, in How They Rate. The rest will be addressed in the April issue.

Spring, summer and autumn earnings seasons are generally half as long, meaning the reported numbers are considerably fresher. Winter reporting season, however, is generally more valuable for full-year guidance, against which further results are measured.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Mar. 8, 2012 (estimate)
• Artis REIT (TSX: AX-U, OTC: ARESF)–Mar. 14, 2012 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Feb. 29, 2012 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Mar. 2, 2012 (estimate)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPUF)–Feb. 13, 2012 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Feb. 28, 2012 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Feb. 9, 2012, Flash Alert
• Colabor Inc (TSX: GCL, OTC: COLFF)–Mar. 8, 2012 (estimate)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Mar. 6, 2012 (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–Feb. 22, 2012 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Feb. 23, 2012 (estimate)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Mar. 21, 2012 (estimate)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Mar. 23, 2012 (estimate)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Feb. 9, 2012, Flash Alert
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Feb. 16, 2012 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 13, 2012 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Feb. 15, 2012 (confirmed)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Mar. 9, 2012 (estimate)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Feb. 14, 2012 (confirmed)
• Shaw Communications (TSX: SJR/B, NYSE: SJR)–Jan. 12, 2012, Flash Alert
• Student Transportation Inc (TSX: STB, OTC: STUXF)–Feb. 14, 2012 (confirmed)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Feb. 29, 2012 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Feb. 7, 2012, Flash Alert
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Mar. 14, 2012 (estimate)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Feb. 9, 2012, Flash Alert
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Feb. 23, 2012 (confirmed)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Mar. 16, 2012 (estimate)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Feb. 24, 2012 (estimate)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Feb. 29, 2012 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Feb. 15, 2012 (confirmed)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–Feb. 14, 2012 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Mar. 14, 2012 (estimate)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Feb. 23, 2012 (estimate)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Mar. 9, 2012 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Mar. 7, 2012 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Feb. 29, 2012 (estimate)