TC Energy (TSX:TRP) has had quite the rollercoaster ride on the TSX over the last few years! Initially, the company faced some bumps due to delays and cost overruns on major projects. However, as it navigated these challenges and focused on strengthening its pipeline and utility operations, things started looking up. Overall, TC Energy has shown resilience, adapting to market demands and aiming to provide stable dividends. But is it still a buy?
The background
TC Energy is a Canadian powerhouse in the energy sector, primarily known for its extensive network of pipelines that transport oil and gas across North America. With a history dating back to 1951, this company has been on quite the journey, evolving from a regional pipeline operator to a key player in the North American energy landscape. It operates some of the most significant pipelines, including the iconic Keystone pipeline. Beyond just pipelines, TC Energy is also making strides in the renewable energy sector, thus investing in solar and wind projects to diversify its portfolio and contribute to a more sustainable future.
What makes TC Energy particularly interesting is its commitment to not just energy delivery but also safety and environmental stewardship. The company prioritizes the integrity of its pipelines and infrastructure, thus ensuring that they operate safely while minimizing their environmental impact. This dedication has earned them a reputation as a responsible energy provider. Plus, TC Energy is all about stability, often providing reliable dividends to its shareholders. This makes it an appealing option for investors looking for a mix of growth and income.
Recent moves
TC Energy has been busy making headlines recently, especially with its spinoff of the Liquids Pipelines business into a new entity called South Bow Corporation. On August 28, 2024, South Bow closed a massive notes offering worth approximately $7.9 billion. This is a significant step toward establishing its independent capital structure. The move was met with strong market interest and is one of the final milestones leading to the spinoff, set to close early in the fourth quarter of 2024. With South Bow poised to operate 4,900 kilometres of crude oil pipeline infrastructure, it aims to connect Alberta's crude oil supplies directly to U.S. refining markets — essentially making it a key player in the energy transport sector.
In addition to the spinoff, TC Energy also completed the sale of the Portland Natural Gas Transmission System for around $1.14 billion. A deal that showcases its strategy to enhance balance sheet strength and streamline operations. This transaction is part of a broader initiative to reach a $3 billion asset divestiture target in 2024. TC Energy continues to focus on reducing its debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio — all while maintaining its commitment to safe and reliable energy transport, these recent developments highlight the company's adaptability and strategic foresight.
Still valuable?
Recent earnings and valuations for TC Energy reveal a company that's not just holding its ground. It's actively moving forward with impressive growth strategies. In the second quarter of 2024, TC Energy reported a comparable EBITDA of $2.7 billion, reflecting a healthy year-over-year increase. And net income attributable to common shares skyrocketed to $1.0 billion, a significant jump from the previous year. This surge highlights the company's effective management and the successful implementation of strategic initiatives, including the spinoff of its Liquids Pipelines business into South Bow Corporation. With a forward price-to-earnings (P/E) ratio of 14.37, the stock appears reasonably valued for its growth potential.
Plus, TC Energy's commitment to enhancing its asset portfolio through significant divestitures and strategic partnerships shows its dedication to maximizing shareholder value. The company is on track to achieve its $3 billion asset divestiture target. This will strengthen its balance sheet and improve its debt-to-EBITDA ratio, which is expected to hit 4.75 times by year-end. With plans to invest in new projects and improve operational efficiency, TC Energy seems well-positioned to meet the growing energy demands in North America while pursuing sustainability initiatives. As it navigates the transition into separate entities with distinct strategies, investors can look forward to a bright future. TC Energy has ample opportunities for growth and profitability on the horizon!
