On Wednesday, BMO Capital Markets updated its outlook on TC Energy (NYSE:TRP:CN) (NYSE: TRP), increasing the price target to C$70.00, up from the previous C$66.00, while reiterating a Market Perform rating on the stock. The adjustment reflects a more optimistic view on the company's growth potential despite a tempered EBITDA growth forecast presented during TC Energy's investor day for the period of 2024 to 2027.
TC Energy's shares did not perform as expected following the investor day, trailing by 87 basis points, as the company projected a lower EBITDA compound annual growth rate (CAGR) of 5-7% for 2024-2027, compared to the earlier estimate of 7% for 2023-2026. However, BMO Capital's analyst highlighted the company's positive presentation tone and the trend of higher project returns, which could lead to surpassing growth expectations.
The analyst from BMO Capital Markets also noted the improving visibility towards achieving TC Energy's annual net capital expenditure target of C$6-7 billion. This outlook supports the rationale behind maintaining the Market Perform rating but warrants an increase in the price target due to higher estimated financial performance.
TC Energy, a major North American energy company, is poised to maintain its Market Perform rating according to BMO Capital. The firm's analyst believes that while recent trading levels justify the current stock rating, the upward adjustment in the price target to C$70 from C$66 is supported by the potential for the company to outperform growth forecasts.
In other recent news, TC Energy has been downgraded from Hold to Sell by CFRA, a move that comes with a reduced price target of $40. This decision follows TC Energy's Q3 earnings report, which saw the company exceed expectations with earnings of CAD$1.03 per share. Despite the company's operational momentum and a strong project backlog, the downgrade was influenced by anticipated strain on operating cash flows due to the dual demands of funding growth projects and maintaining dividend payments.
The company reported a 6% year-over-year increase in comparable EBITDA in its Q3 2024 earnings call and is on track to meet the top end of its projected 2024 EBITDA outlook of $11.2 billion to $11.5 billion. TC Energy has also been actively investing in its operations with CAD$7.0 billion worth of projects put into service in 2024 and an additional CAD$8.5 billion expected to come online in 2025.
Furthermore, TC Energy successfully spun off its liquids pipelines business into South Bow and has declared a quarterly dividend of $0.8225 per share. The company's growth strategy includes a $6 billion to $7 billion CapEx plan, focusing on projects with attractive risk-adjusted returns, and aims to achieve a debt-to-EBITDA ratio of 4.75 times by the end of 2024.
Lastly, the Southeast Gateway project is nearing completion, with the in-service date expected by mid-2025.
InvestingPro Insights
TC Energy's recent performance and future outlook align with several key insights from InvestingPro. The company's stock has shown remarkable strength, with a 59.37% total return over the past year and a 44.79% return in the last six months. This robust performance is reflected in the stock trading near its 52-week high, with the current price at 97.87% of that peak.
InvestingPro Tips highlight TC Energy's commitment to shareholder returns, noting that the company has raised its dividend for 23 consecutive years and maintained dividend payments for 52 consecutive years. This aligns with the company's current dividend yield of 4.73%, which may be attractive to income-focused investors.
The company's financial health appears solid, with a P/E ratio of 15.75 and a market capitalization of $50.97 billion. TC Energy's revenue growth of 11.16% over the last twelve months and an EBITDA growth of 10.72% support BMO Capital's optimistic view on the company's growth potential.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for TC Energy, providing a deeper understanding of the company's financial position and market performance.
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