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TC Energy (TRP) Meets on Q2 Earnings, Sees No Coronavirus Impact

TC Energy Corporation’s TRP stock has risen more than 6% since second-quarter 2020 earnings announcement on Jul 30.

Despite modest results with in-line earnings and a revenue miss, shares gained after management confirmed that there will be no material impact of the coronavirus pandemic on the company’s profit.

Inside TC Energy’s Earnings

TC Energy’s June-quarter earnings of 67 cents per share met the Zacks Consensus Estimate, attributable to a progress in the company’s projects at the Canadian Natural Gas Pipelines and Mexico Natural Gas Pipelines segments. However, the bottom line fell from the year-ago quarter’s earnings of 75 cents per share due to lower contributions from the U.S. Natural Gas Pipelines, Liquids Pipelines, and Power and Storage segments.

Moreover, TC Energy’s comparable EBITDA of C$2.2 billion in the quarter was down 5.4% from C$2.32 billion in the same period last year. 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.

This North American energy infrastructure provider’s revenues of C$3.1 billion missed the Zacks Consensus Estimate by 4% and also dropped 8.4% year over year.

Segmental Information

Canadian Natural Gas Pipelines recorded comparable EBITDA of C$621 million, reflecting a 17.6% rise from the year-ago quarter. This upside was courtesy of strong growth at Canadian Natural Gas Pipelines owing to improved rate base earnings, flow-through depreciation and financial charges on the NGTL System from added services.

U.S. Natural Gas Pipelines’ comparable EBITDA of C$824 million dipped 3.9% from the prior-year level. This downside is due to the sale of certain Columbia midstream assets last August.

Mexico Natural Gas Pipelines’ comparable EBITDA of C$181 million improved from the year-earlier quarter of C$141 million. This upturn was primarily on the back of solid earnings from investment in the Sur de Texas pipeline.

Liquids Pipelines unit generated a comparable EBITDA of C$432 million in the second quarter, declining from the year-ago level of C$582 million. Tumbling volumes in the Keystone Pipeline System caused this downtrend. Moreover, weak earnings from liquids marketing activities were a prime reason.

Power and Storage posted a comparable EBITDA of C$135 million, plunging 38.4% 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 Expenditure and Balance Sheet

As of Jun 30, 2020, TC Energy’s capital investments totaled C$1.99billion. On the same date, the company had cash and cash equivalents worth C$2.02 billion and a long-term debt of C$37.4 billion. Its total debt to total capital was 52.2%.

Key Updates

The company reiterates its previously announced guidance. On Mar 31, this leading industry player stated that it will forge ahead with the construction of Keystone XL, indicating an additional investment of approximately $8 billion. The construction work was initiated in April and the pipeline is projected to come online in 2023. Considering the higher spending on Keystone XL, this year’s total capital expenditure is anticipated to be $10 billion, implying an increase from the prior-year quarter’s reported figure of $7.5 billion.

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 has a Zacks Rank #3 (Hold), currently. Some better-ranked players in the energy space are Murphy USA Inc. MUSA, CNOOC Limited CEO and SilverBow Resources Inc. SBOW, each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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