Credit Suisse Upgrades TransCanada Despite Keystone XL Vote Dying In Senate

Shares of TransCanada Corporation (USA) TRP traded higher on Wednesday morning, despite the U.S. Senate failing to approve the Keystone XL pipeline in a vote on Tuesday.

The move higher is attributed to an upgrade to Outperform from Neutral with a price target raised to C$68 from a previous C$58 at Credit Suisse.

Analyst Andrew Muske notes that TransCanada's asset base is well positioned for several investment themes, including Alberta's oil sands, west coast LNG. In addition, the analyst notes the company has a low-cost generation exposure in "structurally tight" power markets.

"We continue to believe TransCanada's journey to a more capital efficient model will be evolutionary rather than revolutionary," Muske wrote. "In our view, the large-cap Canadian pipes approach to certain industry issues as being akin to Aesop's Tortoise and the Hare fable."

Muske adds that TransCanada is making "positive progress" on large capital programs that are growing positively, which include incremental projects rather than project cost escalation outside of the understandable Keystone XL.

The analyst also notes that the company's improving capital efficiency initiatives and ongoing organic growth positions well for future dividend growth.