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TC PipeLines, LP (TCP) Down 5.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for TC PipeLines, LP . Shares have lost about 5.8% 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 PipeLines, LP due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

TC PipeLines Posts Better-Than-Expected Earnings in Q3

TC PipeLines delivered better-than-expected earnings in third-quarter 2019. The firm reported earnings of 76 cents a unit, beating the Zacks Consensus Estimate of 59 cents. Continued strong natural gas flows, primarily from the Western Canadian Sedimentary Basin led to this outperformance. However, the bottom line fell from 79 cents per unit in the year-ago quarter due to higher maintenance capital expenditures along with lower contribution from the Great Lakes and Iroquois pipelines.

Also, quarterly transmission revenues of $93 million compared unfavorably with $103 million recorded in third-quarter 2018 amid lower rates of many of its pipelines induced by the 2018 FERC actions.

Distribution & Cash Flow

TC PipeLines announced third-quarter cash distribution of 65 cents per unit, in line with third-quarter 2019 and the year-ago figure. Notably, this marks the 82nd quarterly distribution by the partnership.

The partnership's distributable cash flow decreased to $78 million in the quarter under review from $83 million in the year-ago period due to higher system utilization resulting in higher maintenance and operating expenses.

In the reported quarter, TC PipeLines distributed $47 million in cash, flat with the year-ago period.

Pipeline Systems' Performance

Great Lakes:  Earnings of $8 million generated from equity investment were lower than the prior-year quarter’s 9 million.

Northern Border Pipeline: Equity earnings totaled $15 million compared with the prior-year level of $16 million.

Iroquois: Equity earnings amounted to $8 million, below the prior-year figure of $9 million.

Expenses

Operation and maintenance expenses were $18 million in the quarter, higher than the year-earlier period’s $15 million. General/administrative expenses totaled $2 million, unchanged from the year-ago number. Property taxes came in at $6 million, lower than the year-ago level of $7 million.

Depreciation costs declined to $19 million from $25 million a year ago. Financial and other charges also decreased to $20 million from $23 million in the corresponding period of 2018.

Balance Sheet

As of Sep 30, TC PipeLines’ cash and cash equivalents summed $90 million. The partnership had a long-term debt of $1,871 million, representing a debt-to-capital ratio of 72.04%.
 

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months.

VGM Scores

Currently, TC PipeLines, LP has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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.

Outlook

TC PipeLines, LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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