From G & M... Following its Investor Day event on Wednesday, iA Capital Markets analyst Matthew Weekes assumed coverage of TC Energy Corp. (TRP-T +0.84%increase), maintaining the firm’s “buy” recommendation for its shares after emphasizing its “substantial” capital growth program and “right-sized” dividend growth rate.
“TRP highlighted an overall CAGR [compound annual growth rate] in EBITDA of 5 per cent (iA estimate of 4.8 per cent) through 2026,” he said. “ Key highlights are that the Power segment is expected to grow at roughly double the corporate average, the Natural Gas segment is expected to grow at approximately the corporate average, while the Canadian Natural Gas and Liquids Pipelines segments will likely experience growth below the corporate average. Based on the Company’s projections, by 2026 EBITDA is expected to be $11.8-billion. By 2026, Canadian and U.S. Natural Gas Pipelines should account for approximately two-thirds of EBITDA, which is similar to today’s share.”
“The Company also highlighted its $29-billion growth program. The segments that will consume the largest proportion of capital will be US Natural Gas, Canadian Natural Gas, and Power. Also, investors should feel highly confident that additional projects will be announced next year.”
TRP also reiterated its dividend growth outlook of 3-5 per cent, falling from a projection of 5-7 per cent last year. Mr. Weekes pegged the decline of the decline to the demise of the Keystone XL Pipeline, which caused a “significant” loss of near-term EBITDA growth.
“While a dividend growth rate in excess of 5 per cent was possible, it was aggressive,” he said.
After slight reductions to his 2022 estimates and in response to a recent decline in equity prices, Mr. Weekes trimmed the firm’s target for TRP shares to $66 from $70. The average on the Street is $67.95.
Elsewhere, CIBC World Markets analyst Robert Catellier trimmed his target to $72 from $74 with an “outperformer” rating.