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TC Energy (TRP) Beats on Q3 Earnings, Asserts No Coronavirus Impact

Zacks Equity Research
·5 min read

TC Energy Corporation TRP stock has been stable since third-quarter 2020 earnings announcement on Oct 29.

In spite of better-than-expected earnings and revenue, the company’s shares failed to take off after management disclosed cost overruns for its Coastal Gaslink pipeline.

Inside TC Energy’s Earnings

TC Energy’s third-quarter 2020 adjusted earnings of 71 cents per share beat the Zacks Consensus Estimate of 69 cents per share. The better-than-expected results can be attributed to rapid development of projects in the Canadian Natural Gas Pipelines and Mexico Natural Gas Pipelines segments.

However, the bottom line declined from the year-ago quarter’s figure of 79 cents per share due to reduced contributions from the Liquids Pipelines and Power and Storage segments.

Moreover, TC Energy’s comparable EBITDA of C$2.3 billion in the September-end quarter was down 1.7% from C$2.34 billion in the prior-year period. Further, management maintained that with 95% of the company’s comparable EBITDA coming from long-term, fixed-rate contracts, the metric is mostly insulated from the short-term price and throughput fluctuations of the underlying commodities.

The North America-based energy infrastructure provider’s quarterly revenues of $2.4 billion beat the Zacks Consensus mark by 4.3%, but dropped 1.1% year over year.

Segmental Information

Canadian Natural Gas Pipelines reported comparable EBITDA of C$666 million, up 16.4% from the year-ago quarter’s levels. The upside was the outcome of robust growth at Canadian Natural Gas Pipelines owing to improved rate base earnings, flow-through depreciation and financial charges on the NGTL System from additional facilities.

U.S. Natural Gas Pipelines’ comparable EBITDA of C$863 million reflects an 8.4% increase from the prior-year quarter’s level. This upside can be attributed to reduced operating costs and increased earnings from ANR owing to the natural gas sale from some gas storage facilities.

Mexico Natural Gas Pipelines’ comparable EBITDA of C$170 million improved 11.1% from the year-earlier quarter’s figure of C$153 million. This upside came primarily on the back of solid earnings from investment in the Sur de Texas pipeline, which became operational on September last year.

Liquids Pipelines unit’s comparable EBITDA of C$415 million in the reported quarter, deteriorated from the year-earlier quarter’s level of C$575 million. This downtrend resulted from the plunging volumes of the Keystone Pipeline System. Moreover, lower earnings from liquids marketing activities were a prime reason.

Power and Storage posted a comparable EBITDA of C$187 million, plummeted 25.8% year over year due to an earnings decline from Bruce Power, thanks to the planned removal of unit 6.

TC Energy Corporation Price, Consensus and EPS Surprise

 

TC Energy Corporation Price, Consensus and EPS Surprise
TC Energy Corporation Price, Consensus and EPS Surprise

TC Energy Corporation price-consensus-eps-surprise-chart | TC Energy Corporation Quote

 

Capital Expenditures and Balance Sheet

As of September 30, 2020, TC Energy’s capital investments summed C$2.3billion. Concurrently, the company had cash and cash equivalents worth C$1.19 billion anda long-term debt of C$36.9 billion. Its total debt to total capital was 58.8%.

Key Updates

The company re-emphasizes its aforementioned guidance. On Mar 31, this leading industry player stated that it will move forward with the Keystone XL constructive process, which indicates an additional investment of approximately $8 billion. The construction was launched in April and is expected to come online in 2023. Considering the higher spending on Keystone XL, this year’s total capital expenditures are anticipated to be $10 billion, with no further increase from the earlier-year quarter’s reported figure.

TC Energy also mentioned that it is progressing with Wisconsin Access Project to increase natural gas capacity. The $200-million project is also set to improve reliability of a pipeline system that delivers fuel from various basins to the U.S. Midwest and Gulf Coast.

Further, the energy infrastructure provider expects costs for its $6.6-billion Coastal Gaslink pipeline in British Columbia to go up from its prior projections due to increased scale, permit deferrals and the impacts of the pandemic.

TC Energy's board of directors announced the third-quarter 2020 dividend of 81 Canadian cents per share (or C$3.24 cents annually).

Zacks Rank & Key Picks

TC Energy currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space include DCP Midstream Partners LP DCP, sporting a Zacks Rank #1 (Strong Buy), and Nustar Energy LP NS and Cabot Oil Gas Corporation COG, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DCP Midstream is expected to see stellar earnings growth of 169.1% in 2021, while Nustar Energy will likely register bottom-line improvement of 177.5% during the same period.

In the past six months, the Zacks Consensus Estimate for Cabot Oil’s 2020 earnings has been raised by 10.5%.

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