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TC Pipelines' (TCP) Q3 Earnings Beat Estimates, Sales Up Y/Y

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TC PipeLines, LP TCP reported third-quarter 2018 earnings of 79 cents per unit, surpassing the Zacks Consensus Estimate of 72 cents. Further, the bottom line increased from 61 cents per unit recorded in the year-ago quarter. Higher equity earnings, especially from the Great Lakes, and increased revenues drove the results.

Quarterly transmission revenues of $103 million were nominally higher than $100 million recorded in the third quarter of 2017. The increase can be attributed to higher contribution from PNGTS and Bison Pipelines.

Distribution & Cash Flow

TC PipeLines announced third-quarter 2018 cash distribution of 65 cents per unit, in line with the prior-quarter figure but lower than the year-ago level of $1.00. The lowered distribution will enable the partnership to strengthen its balance sheet by utilizing the cash to repay debts.

Notably, this marks the 78th consecutive quarterly distribution paid by the partnership. The distribution will be paid on Nov 14, 2018 to its unitholders of record as of Nov 2, 2018.

The partnership's total distributable cash flow increased 12.8% year over year to $88 million, primarily driven by an increase in net income coupled with reduced maintenance expenditure of Gas Transmission Northwest.

In the reported quarter, TC PipeLines distributed $47 million in cash compared with $68 million in the year-ago quarter.

Pipeline Systems' Performance

Great Lakes: The partnership generated earnings of $9 million from equity investment, higher than the prior-year quarter’s $2 million.

Northern Border Pipeline: Equity earnings at this pipeline totaled $16 million, in line with the prior-year quarter.

Iroquois: Equity earnings at this pipeline amounted to $9 million, in line with the prior-year figure. TC PipeLines completed the acquisition of 49.3% interest in Iroquois from TransCanada on Jun 1, 2017.

Expenses

Operation and maintenance expenses were $15 million in the quarter vis a vis $16 million incurred in the year-ago quarter. General/administrative expenses came in at $2 million compared with the year-ago figure of $1 million. Property taxes and depreciation charges remained unchanged from the year-ago level at $7 million and $25 million, respectively. Financial and other charges in the quarter came in at $23 million, flat with the year-ago period.

Balance Sheet

As of Sep 30, 2018, TC PipeLines had cash and cash equivalents of $48 million. The partnership had a long-term debt of $2.2 billion, representing a debt-to-capitalization ratio of 65.5%.

Zacks Rank and Other Stocks to Consider

TC Pipelines currently sports a Zacks Rank #1 (Strong Buy).

Other top-ranked players in the same space include Energen Corporation EGN, Enterprise Products Partners L.P. EPD and Phillips 66 Partners LP PSXP, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Energen delivered average positive earnings surprise of 18.62% in the last four quarters.

Enterprise Products surpassed estimates in each of the trailing four quarters, with average of 9.29%

Phillips 66 Partners pulled off average positive earnings surprise of 6.03% in the preceding four quarters.

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