Winter Favors TC PipeLines Earnings, Units Up - Analyst Blog

Pipeline operator, TC PipeLines LP TCP posted stellar first-quarter 2014 results. Higher short-term revenue generation from the Gas Transmission Northwest LLC GTN, Northern Border and Great Lakes pipelines, due to the severe cold months, led to the outperformance.

The market reacted positively to the result as TC PipeLines gained nearly 4% on Apr 28, settling at $52.90. This also marked a new 52-week high for the partnership.

The Calgary, Alberta-based master limited partnership MLP reported first quarter earnings per unit EPU of 90 cents, 73% higher than the prior-year quarter level of 52 cents and also above the Zacks Consensus Estimate of 59 cents.

Distribution & Cash Flows

TC PipeLines announced first-quarter cash distribution of 81 cents per unit ($3.24 per unit annualized), up 3.9% from the year-ago period and flat sequentially. The distribution will be paid on May 15, to unitholders of record as of May 5.

The partnership's total cash flows during the reported quarter increased about 40.0% from the year-ago quarter to $60.0 million. The increase came on the back of additional cash distributions from TC PipeLines' extra 45% interest in GTN and Bison each, acquired during the third quarter of 2013.

TC PipeLines distributed $52.0 million during the quarter, up almost 21.0% from the year-ago level, as a result of the rise in the quarterly distribution in July last year. An increase in outstanding common units following the May 2013 equity offerings, also aided the results.

Pipeline Systems' Performance

Great Lakes: The partnership's equity income from the Great Lakes increased significantly from $2 million in the prior-year quarter to $10 million. The improvement was due to revenues generated from higher short-term services provided by the pipeline during the severe cold months.

Northern Border Pipeline: Equity income from the Northern Border Pipeline was $23.0 million, up 43.8% year over year, favored by the winter months.

Liquidity

As of Mar 31, 2014, TC PipeLines had $130.0 million outstanding on the $500.0 million revolver portion of its senior credit facility. The partnership had long-term debt (including current portion) of $1,568.0 million, representing a debt-to-capitalization ratio of 46.7%.  

Zacks Rank & Other Stock Picks

The partnership currently carries a Zacks Rank #3 (Hold). This implies that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players from the same industry such as Boardwalk Pipeline Partners, LP BWP, Energy Transfer Equity, L.P. ETE and Enterprise Products Partners L.P. EPD. While Boardwalk Pipeline sports a Zacks Rank #1 (Strong Buy), Energy Transfer Equity and Enterprise Products Partners hold a Zacks Rank #2 (Buy).