TC Energy (TRP) Q3 Earnings Beat, EBITDA & DCF Rise Y/Y

TC Energy Corporation’s (TSX:TRP) third-quarter 2019 earnings of 79 cents per share surpassed the Zacks Consensus Estimate as well as the year-ago figure of 76 cents. This robust performance is primarily driven by a solid progress in the company’s projects at Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Liquids Pipelines plus the Power and Storage segments. Contributions from growth projects worth $8.2 billion that came online in 2019 so far also aided the earnings uptick.

Moreover, the company’s comparable EBITDA of C$2.3 billion in the quarter was up from the number in the same period last year.

Comparable distributable cash flow (DCF) of C$1.6 billion (C$1.78 per share) in the third quarter rose from C$1.4 billion (C$1.56) in the corresponding period of 2018.

However, TC Energy’s revenues of C$3.13 billion dipped 0.72% year over year.

Segmental Information

Canadian Natural Gas Pipelines recorded comparable EBITDA of C$572 million, reflecting a 9.6% rise from the year-ago quarter. This upside was attributable to impressive contribution from Canadian Natural Gas Pipelines resulting from the Canadian Mainline recovery of increased depreciation and higher incentive earnings in 2019.

U.S. Natural Gas Pipelines’ comparable EBITDA amounted to C$796 million, up 11.3% from the prior-year level. This upside can be attributed to better contributions from Columbia Gas and Columbia Gulf growth projects that commenced operations in the second quarter.

Mexico Natural Gas Pipelines’ comparable EBITDA of C$153 million was essentially in line with the year-earlier quarter. Contribution from a strong U.S. dollar was offset by changes in the timing of revenue recognition.

Liquids Pipelines unit generated comparable EBITDA of C$575 million in the third quarter, improving from the year-ago level of C$467 million. Rising volumes in the Keystone Pipeline System led to this uptrend. Moreover, earnings growth from liquids marketing activities was a key catalyst.

Power and Storage posted comparable EBITDA of C$252 million, up 21.7% year over year on the back of earnings improvement from Bruce Power owing to a hike in realized sales price and higher output.

Capital Expenditure and Balance Sheet

During the three months ended Sep 30, 2019, TC Energy’s capital investments totaled C$1.8 billion. On the same date, the company had cash and cash equivalents of C$2.2 billion and long-term debt of C$36.4 billion. Its debt-to-capitalization ratio was 53.1%.

Key Updates

This leading North American energy infrastructure company is advancing secured growth projects worth C$30-billion, which are likely to come online by 2023. Moreover, it already invested nearly C$9 billion in the entire program, with approximately C$2.5-billion funded projects of the same, expected to be completed by this year-end.

The company anticipates these growth projects to boost earnings and cash flow. This, in turn, will generate 8-10% annual dividend growth through 2021. TC Energy continues to advance the Keystone XL and Bruce Power life extension projects.

During the quarter, the company completed the partial monetization of its Northern Courier pipeline in Alberta along with the sale of certain Columbia Midstream assets in the Appalachian region. It further entered into an agreement to sell its natural gas fired power plants in Ontario.

Zacks Rank & Key Picks

TC Energy has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are World Fuel Services Corporation (NYSE:INT) , Phillips 66 (NYSE:PSX) and Murphy USA Inc. (NYSE:MUSA) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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