TC Energy (TRP) Down 23.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for TC Energy (TRP). Shares have lost about 23.8% 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 Energy due for a breakout? 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 important catalysts.

TC Energy Q4 Earnings Beat Estimates, Revenues Down Y/Y

TC Energy Corporation’s fourth-quarter 2019 earnings of 78 cents per share came in line with the Zacks Consensus Estimate as well as the year-ago figure. This performance is primarily attributable to a solid progress in the company’s projects at U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines plus the Power and Storage segments. Contributions from growth projects worth C$8.7 billion that came online in 2019 also aided the earnings.

However, the company’s comparable EBITDA of C$2.3 billion in the quarter was down from C$2.5 billion reported in the same period last year owing to lower contribution from the Canadian Natural Gas Pipelines segment.

TC Energy’s revenues of C$3.26 billion dropped 16.42% year over year.

Segmental Information

Canadian Natural Gas Pipelines recorded comparable EBITDA of C$618 million, reflecting a 24.4% fall from the year-ago quarter. This downside was attributable to a weak contribution from Canadian Natural Gas Pipelines due to the Canadian Mainline’s decreased net income and lower incentive earnings in 2019.

U.S. Natural Gas Pipelines’ comparable EBITDA amounted to C$855 million, up 5.3% from the prior-year level. This upside can be attributed to better contributions from Columbia Gas and Columbia Gulf growth projects.

Mexico Natural Gas Pipelines’ comparable EBITDA of C$165 million improved from the year-earlier quarter of C$152 million. 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$472 million in the fourth quarter, declining from the year-ago level of C$538 million. Tumbling volumes in the Keystone Pipeline System caused this downtrend. Moreover, earnings drop from liquids marketing activities due to lower margins was a prime reason.

Power and Storage posted comparable EBITDA of C$210 million, up 25.7% 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

As of Dec 31, 2019, TC Energy’s capital investments totaled C$2.06 billion. On the same date, the company had cash and cash equivalents worth C$1.3 billion and long-term debt of C$34.2 billion. Its debt-to-capitalization ratio was 51.41%.

Key Updates

This leading North American energy infrastructure player is advancing two new expansion projects worth C$1.3 billion, which are likely to be active by 2023. Of the total, the company invested C$0.9 billion in 2023 NGTL Intra-Basin System Expansion program, which is set to carry natural gas from the Western Canadian Sedimentary Basin to end markets on the NOVA gas network that are located in Alberta. The remaining C$300-million Alberta XPress project will be utilized for extending the ANR Pipeline (ANR) to help Canadian oil reach the U.S. Gulf Coast.

TC Energy's board of directors announced an 8% dividend hike in its first-quarter 2020 to 81 Canadian cents per share (or C$3.24 cents annually). This marks the company’s 20th consecutive dividend payout raise. The move is indicative of its commitment to create value for its shareholders and also underlines its confidence in business growth. The dividend will be paid out on Apr 30 to its shareholders of record as of Mar 31, 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.