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TC PipeLines, LP (TCP) Down 1.3% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for TC PipeLines, LP (TCP). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TC PipeLines, LP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

TC PipeLines Posts Weaker Y/Y Results in Q2

TC PipeLines reported second-quarter earnings of 75 cents a share, missing the Zacks Consensus Estimate by a penny. Lower earnings from Northern Border and PNGTS pipelines were attributed to the underperformance. The bottom line decreased from $1.00 per unit recorded in the year-ago quarter.

Quarterly transmission revenues of $93 million compared unfavorably with $111 million recorded in second-quarter 2018 amid lower contribution from Bison Pipelines.

Distribution & Cash Flow

TC PipeLines announced second-quarter 2019 cash distribution of 65 cents per unit, in line with first-quarter 2019 and the year-ago figure. Notably, this marks the 81st quarterly distribution paid by the partnership. The distribution is payable on Aug 14, 2019 to its unitholders of record as of Aug 2.

The partnership's distributable cash flow decreased to $70 million in the quarter under review from $101 million in the year-ago period, owing tolower contribution from PNGTS and Northern Border pipelines.

In the reported quarter, TC PipeLines distributed $47 million in cash,in line with the year-ago period.

Pipeline Systems' Performance

Great Lakes: The partnership generated earnings of $14 million from equity investment, lower than the prior-year quarter’s 15 million.

Northern Border Pipeline: Equity earnings at this pipeline totaled $9 million compared with the prior-year level of $12 million.

Iroquois: Equity earnings at this pipeline amounted to $7 million, lower than the prior-year figure of $9 million.

Expenses

Operation and maintenance expenses were $17 million in the quarter, in line with the year-ago period. General/administrative expenses totaled $2 million compared with the year-ago figure of $1 million. Property taxes came in at $6 million, lower than the year-ago level of $7 million. Depreciation costs declined to $19 million from $24 million in the year-ago period. Financial and other charges in the quarter also reduced to $21 million from $23 million in the corresponding period of 2018.

Balance Sheet

As of Jun 30, TC PipeLines had cash and cash equivalents of $45 million. The partnership had a long-term debt of $1,892 million, representing a debt-to-capital ratio of 72.4%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, TC PipeLines, LP has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

TC PipeLines, LP has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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