TC PipeLines (TCP) Q3 Earnings Miss on Higher Expenses - Analyst Blog

Pipeline operator, TC PipeLines LP (TCP) reported lower-than-expected third-quarter 2014 results. A decrease in transportation revenues from the GTN and higher expenses due to the Bison pipeline acquisition weighed on the results.

The Calgary, Alberta-based master limited partnership (MLP) posted third-quarter earnings per unit (EPU) of 48 cents, which lagged the Zacks Consensus Estimate of 56 cents. The bottom line was also substantially lower than the year-ago quarter earnings of 58 cents per unit. Following the earnings miss, units of TC Pipelines witnessed a 1.5% fall on the NYSE.

Distribution & Cash Flows

TC PipeLines announced third-quarter cash distribution of 84 cents per unit ($3.36 per unit annualized), in line with the previous quarter distribution. The distribution will be paid on Nov 14 to unitholders of record on Nov 4.

The partnership's total cash flow during the reported quarter fell about 1.7% year over year to $57 million. The decline is a result of lower net income from Other Pipes. However, it was partially offset by increased cash distributions from the partnership's pipeline investments.

TC PipeLines distributed $54 million in the reported quarter, up almost 4% from the year-ago level.

Pipeline Systems' Performance

Great Lakes: The partnership's equity income from Great Lakes was $1 million.

Northern Border Pipeline: Equity income from the Northern Border Pipeline was $14 million, compared with $17 million in the year-ago quarter.

Liquidity

As of Sep 30, 2014, TC PipeLines had $165 million outstanding on the $500 million senior credit facility. The partnership had long-term debt of $1,454 million, representing a debt-to-capitalization ratio of 44.5%.  

Acquisition

On Oct 1, 2014, TC PipeLines completed the acquisition of the remaining 30% interest in the Bison Pipeline LLC from a subsidiary of TransCanada Corporation (TRP). The deal was worth $215 million, in addition to purchase price adjustments.

Zacks Rank

TC PipeLines currently carries a Zacks Rank #3 (Hold).

Promising Stock Picks

One could consider better-ranked players from the same industry such as Magellan Midstream Partners LP (MMP) and Rose Rock Midstream, L.P. (RRMS). Both these stocks sport a Zacks Rank #1 (Strong Buy).
 

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