On Wednesday, TC Energy (NYSE:TRP:CN) (NYSE: TRP) stock received an upgrade from Barclays (LON:BARC) from Equalweight to Overweight, accompanied by an increase in the price target to C$61.00, up from C$55.00.
The midstream energy company, known for its extensive pipeline operations, has been recognized for its robust asset base, which includes long-term contracts and regulated assets. These factors contribute to the company's defensive market position.
The upgrade reflects a positive outlook on TC Energy's potential to navigate the evolving energy landscape. The firm's existing infrastructure spans multiple commodity value chains, which positions it well for future developments in the sector. The company's natural gas assets, in particular, are expected to play a vital role in supporting the growth of North American LNG exports.
TC Energy's balance sheet, however, does present some challenges. The company is currently facing execution risks with its Liquids spin and is dealing with reduced Keystone pipeline throughput.
The pipeline's full pressure will not be restored until it receives authorization from the Pipeline and Hazardous Materials Safety Administration (PHMSA). Additionally, there are ongoing concerns regarding the final costs of the $4.5 billion Southeast Gateway pipeline project.
Despite these headwinds, Barclays' assessment points to the strengths of TC Energy's business model and its strategic positioning. The firm's infrastructure is anticipated to be increasingly significant as renewable energy sources become more prevalent, with natural gas serving as a key backup for intermittent renewable energy production.
The analyst's statement underscores the dual nature of TC Energy's current situation—defensive assets that provide stability and certain risks that need to be navigated. As the company continues to invest and adapt, its role in a changing energy market is expected to remain significant.
In other recent news, TC Energy Corporation saw its $15 billion claim related to the cancellation of the Keystone XL pipeline project denied. The company had sought compensation through a formal arbitration request under the North American Free Trade Agreement (NAFTA) in 2021.
TC Energy expressed disagreement with the tribunal's ruling, stating it did not align with their interpretation of NAFTA and the United States-Mexico-Canada Agreement (USMCA) protections.
On a separate note, TC Energy shareholders approved the spinoff of its Liquids Pipelines business into a new entity, South Bow Corporation. This move is part of TC Energy's strategy to create two focused energy infrastructure companies. The split is expected to occur between the late third quarter and mid-fourth quarter of 2024, subject to necessary regulatory and court approvals.
BMO Capital maintained a Market Perform rating for TC Energy, with a price target of Cdn$55.00. The evaluation comes as TC Energy approaches a significant shareholder vote regarding the proposed spin-off of its liquids infrastructure assets into South Bow Corp. The Market Perform rating indicates that the stock is expected to perform in line with the broader market or its sector in the near future.
InvestingPro Insights
In line with the recent upgrade from Barclays, TC Energy (TRP:CN) (NYSE: TRP) demonstrates a mix of stability and growth potential. The company's commitment to shareholder returns is evident, as highlighted by an impressive track record of increasing its dividend for 23 consecutive years. This consistency is further reinforced by the fact that TC Energy has maintained dividend payments for over half a century. Investors may find comfort in the company's low price volatility and the recent strong return over the last three months, indicating a steady investment in a turbulent market.
From a valuation perspective, TC Energy's current P/E Ratio stands at 20.69, with a more attractive adjusted P/E ratio of 13.57 for the last twelve months as of Q1 2024. This suggests that the company is trading at a low price-to-earnings ratio relative to its near-term earnings growth, which could be appealing to value investors. Additionally, TC Energy's dividend yield is notably high at 7.03%, making it a potentially attractive option for income-focused investors. The company is trading at 97.32% of its 52-week high, signaling strong market confidence.
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