Why is TC Energy (TRP) up 1.6% since its last earnings report?

A month has passed since the last earnings report for TC Energy (TRP). Shares rose about 1.6% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TC Energy headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

TC Energy’s fourth-quarter earnings beat estimates and are up year over year

TC Energy’s fourth-quarter 2020 adjusted earnings of 88 cents per share beat the Zacks Consensus Estimate and prior-year quarter earnings of 78 cents. The outstanding performance can be attributed to the rapid development of projects in the Canadian Natural Gas Pipelines and Mexican Natural Gas Pipelines segments.

Moreover, TC Energy’s December comparable EBITDA was C$2.32 billion, up slightly from C$2.31 billion in the prior-year period.

The North American-based energy infrastructure provider’s quarterly revenue of $2.53 billion increased 2.3% year-over-year.

Segment information

Canadian natural gas pipelines reported comparable EBITDA of C$682 million, up 10.4% from the prior quarter level. This positive result was the result of strong growth in Canadian natural gas pipelines due to improved core earnings, flow-through depreciation and NGTL finance charges from additional facilities.

Natural gas pipelines in the UScomparable EBITDA of C$919 million reflects an increase of 7.5% from the prior quarter level. This benefit may include reduced operating costs and increased ANR profits due to the sale of natural gas from certain gas storage facilities.

Natural gas pipelines in Mexicocomparable EBITDA of C$170 million increased slightly from C$153 million for the prior quarter. This improvement was primarily due to solid gains from investments in the Sur de Texas pipeline, which went into service in September 2019.

Liquid pipelines The unit’s comparable EBITDA of C$408 million in the reported quarter deteriorated from C$472 million in the prior quarter. The downward trend was due to a decline in Keystone Pipeline system volumes. In addition, the main reason was lower revenues from the liquid marketing business.

Power and storage saw comparable EBITDA of C$161 million decline 23.3% year-over-year due to a decline in Bruce Power’s earnings related to the planned start-up of Unit 6.

Capital expenditure and balance sheet

As of December 31, 2020, TC Energy’s capital investments amounted to C$2.2 billion. At the same time, the company had cash and cash equivalents of C$1.53 billion and long-term debt of C$34.9 billion. Its total debt to total capital was 57.8%.

Key updates

The company reiterates its above guidelines. Last month, management at the leading industry player said that construction of the Keystone XL pipeline would likely be interrupted in response to President Joe Biden’s pledge to suspend presidential permits to continue construction. TC Energy is unhappy with Biden’s decision and expects broad regulatory reviews of the pipeline to be rolled back. In addition, the company has decided to cut over 1,000 construction jobs in the coming weeks.

Management also mentioned that the company is implementing the Wisconsin Access Project to expand natural gas extraction capacity. This $200 million project also aims to improve the reliability of the pipeline system that delivers fuel from various basins to the U.S. Midwest and Gulf Coast.

Moreover, the energy infrastructure provider expects costs for the Coastal Gaslink pipeline in British Columbia to increase sharply compared to earlier projections due to larger scale, permitting deferrals and the effects of the pandemic.

TC Energy’s board of directors announced a fourth quarter 2020 dividend of 87 Canadian cents per share (or 3.48 Canadian cents annually).

How have estimates changed since then?

It turns out that new estimates have been trending downward over the past month.

VGM results

Currently, TC Energy has a Weak Growth Score of D, although slightly behind its Momentum Score of F. However, the stock is rated a B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show a downward trend, and the scale of this revision looks promising. Notably, TC Energy carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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