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Why Is TC PipeLines (TCP) Down 8.9% Since the Last Earnings Report?

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It has been more than a month since the last earnings report for TC PipeLines, LP (TCP - Free Report) . Shares have lost about 8.9% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 PipeLines Lags Earnings and Revenue Estimates in Q2

TC PipeLines reported second-quarter 2017 earnings of $0.73 per unit, slightly below the Zacks Consensus Estimate of $0.74. Higher expenses and lower-than-expected revenues led to weaker results. Further, the figure also deteriorated from $0.76 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.

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 73rd consecutive quarterly distribution paid by the partnership.

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 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 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%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

TC PipeLines, LP Price and Consensus

 

TC PipeLines, LP Price and Consensus | TC PipeLines, LP Quote

VGM Scores

At this time, the stock has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is solely suitable for value investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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