TC Energy Corporation 

For over 70 years, TC Energy Corporation (NYSE: TRP) operates in pipelines, storage facilities and power-generation plants in Canada, the US and Mexico.

TRP Details

Results Performance for the Second Quarter Ended 30 June 2021 (Q2FY21)

• The net income for Q2FY21 stood at $982 million or $1.00 per share in Q2FY21 versus net income of $1.3 billion or $1.36 per share in Q2FY20. This was primarily driven by the diversified portfolio of critical energy infrastructure assets.
• Comparable earnings stood at $1.0 billion or $1.07 per common share in Q2FY21 versus $863 million or $0.92 per common share Q2FY20.
• The company declared a quarterly dividend of $0.87 per common share for the quarter ending 30 September 2021, equivalent to $3.48 per common share on an annualized basis.

Financial Snapshot (Source: Company Reports) 

Recent Updates:

• On 7 October 2021, the company and Nikola advised that they entered into a strategic collaboration for the development, construction, ownership and/or operation of critical hydrogen infrastructure for hydrogen fueled zero-emission heavy-duty trucks.
• On 20^th September 2021, EDP Renewables SA and TC Energy Corporation have executed a 15-year power purchase agreement (PPA) for 100% of the output of the 297-megawatt (MW) Sharp Hills Wind Farm.
• Recently, the company stated that New ESG targets as well as emissions reduction strategies positions it to achieve the zero emissions from operations, on the net basis, by 2050 and also sets 30% reduction target in greenhouse gas (or GHG) emissions intensity by 2030.

Outlook

Phase II of Grand Chenier XPress, connecting supply directly to U.S. Gulf Coast LNG export facilities, is expected to offer for service in early 2022. In addition, the construction is ongoing at Villa de Reyes site expected to reach partial in-service by the end of 2021, with balance construction to be completed in the first half of 2022. Termination related work and related costs will continue at Keystone XL project through 2022. While final terms are still underway, Columbia Gas expects a final settlement to be filed with FERC in Q3FY21, with 2021 revenue anticipated to be as per the estimates recorded, subject to revision following completion and approval of settlement terms.

Key Risks:

The NGTL System and pipelines downstream depend mainly on supply from the WCSB. Further, the Columbia Gas system and its connecting pipelines mainly depend on Appalachian supply. The company continues to monitor changes in the customers' natural gas production plans and how these could impact existing assets and new project schedules. Moreover, it faces risk relating to demand for pipeline capacity, commodity prices, regulatory risk, governmental risk, and construction and operations risk.

Valuation Methodology: Price/EPS Based Relative Valuation (Illustrative)

Stock Recommendation: 

The company posted lower current ratio at the end of June 2021 as compared to the industry median. Also, it is exposed to the risks like change in weather conditions, cost and availability of labour, equipment as well as materials, etc.

The stock has been valued using a P/E multiple based illustrative relative valuation method and target price reflects that the stock price might witness a fall of low-double digit (in % terms). The company might trade at a slight discount to its peers’ average considering the risks associated with the business as well as lower current ratio (June 2021) as compared to the industry median.

Considering the above facts, we give a “Sell” rating on the stock at the closing price of US$54.55 per share (Time: 11:33 AM, NY, USA) on 27th October 2021.

Technical Overview:

Chart:

Source: REFINITIV

Note: Orange Color Line Reflects RSI (14-Period) 

Note 1: The reference data in this report has been partly sourced from REFINITIV.