TC PipeLines (TCP) Lags Earnings And Revenue Estimates In Q2

Pipeline operator TC PipeLines, LP (NYSE:TCP) reported second-quarter 2017 earnings of 73 cents per unit, slightly below the Zacks Consensus Estimate of 74 cents. Higher expenses and lower-than-expected revenues led to weaker results. Further, the figure also deteriorated from 76 cents per unit recorded in the year-ago quarter.

Quarterly transmission revenues of $101 million missed the Zacks Consensus Estimate of $117 million. Nonetheless, the top line remains unchanged from the prior-year quarter level.

TC PipeLines, LP Price, Consensus and EPS Surprise

Distribution & Cash Flow

Late last month, TC PipeLines announced second-quarter 2017 cash distribution of $1.00 per unit, up 6% from the amount paid in first-quarter 2017. This is the 73^rd consecutive quarterly distribution paid by the partnership and is payable on Aug 11 to unit holders of record at the close of business on Aug 1.

The sequential rise in the cash distribution is attributed to the expected accretion from the purchase of 49.3% interest in the Iroquois Gas Transmission System, LP from TransCanada Corporation (TO:TRP) together with TransCanada's remaining 11.8% interest in PNGTS. The acquisition which closed on Jun 1 is likely to add additional long-term contracts to TC PipeLines portfolio in strong market areas and diversify its sources of cash flows.

The partnership's total distributable cash flow increased about 5.1% year over year to $82 million.

TC PipeLines distributed $135 million in the reported quarter compared with $119 million in the year-ago quarter.

Pipeline Systems' Performance

Great Lakes: The partnership incurred a loss of $6 million from equity investment, wider than the prior-year quarter loss of $4 million.

Northern Border Pipeline: Equity loss at this pipeline totaled $15 million, narrower than the prior-year quarter loss of $16 million.

Iroquois: Equity loss at this pipeline totaled $3 million, as against the breakeven level in the prior-year quarter.

Expenses

The operation and maintenance expenses increased to $17 million in the quarter compared with $14 million in the prior-year quarter. General/administrative and property charges remained unchanged from the year-ago figure of $2 million and $7 million respectively. Depreciation costs increased to $25 million in the reported quarter, compared with $24 million in the year-ago quarter. Financial charges in the quarter came at $19 million, up by 11.8%.

Liquidity

As of Jun 30, 2017, TC PipeLines – which countsBoardwalk Pipeline Partners, LP (NYSE:BWP) and Delek Logistics Partners, LP (NYSE:DKL) as its peers – had cash and cash equivalents of $51 million. The partnership had long-term debt of $2,333 million, representing a debt-to-capitalization ratio of 71.8%.

The partnership currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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