Analyst updates Following its annual Investor Day event, National Bank Financial analyst Patrick Kenny sees TC Energy Corp. (TRP-T) returning to “full strength” and “powering up returns.”
“With its mega projects in the rearview, visibility on achieving less than 4.75 times leverage continues to improve,” he said. “On the growth front, TRP’s North American natural gas pipeline footprint remains uniquely positioned to capture significant value from the rising natural gas and related power demand trends (coal-to-gas, LNG, data centers, onshoring), including 23+ Bcf/d of potential development opportunity for the company. Furthermore, returns on sanctioned projects have improved from after-tax IRRs of 8.5 per cent (6-8 times EBITDA build multiple) in 2020 to 11.0 per cent (5-7 times EBITDA build multiple) in 2024, confirming increased torque to new capital investments going forward.”
On Tuesday, the Calgary-based company revealed it expects 2025 core profit to be in the range of about $10.7-10.9-billion, higher than its 2024 forecast, due to rising demand for natural gas and electrification. It also announced four new growth projects aligned with those market conditions, which would total to nearly $1.5-billion in capital expenditures.
“The company’s $32-billion secured capital program for 2025-2030 is 88-per-cent focused on its natural-gas pipeline business, largely geared towards the U.S., while remaining committed to its capital spend discipline of $6-$7-billion (net) per year through the end of the decade,” he said. “Furthermore, the company demonstrated its ability to effectively manage its capital program with capital efficiency and cost optimizations across its portfolio realizing/identifying $2.5-billion of total cost savings for the 2024-2027 period.
“Recalibrating our 2025-2027 expectations in line with guidance, our Natural Gas Pipelines and Power segment estimates bump up, partially offset by higher cash tax expectations. Overall, our 2025 estimated AFFO [adjusted funds from operations] per share nudges up to $5.18 (was $5.00), while 2025 estimated D/EBITDA taps down to 5.0 times (was 5.1 times) and towards 4.7 times longer-term, largely in line with management’s forecast.”
Citing accretion to his long-term estimates from the newly sanctioned growth projects and a “lower net capital expenditure profile driven by efficiencies and optimizations,” Mr. Kenny bumped his target for TC Energy shares to $71 from $70 with an “outperform” rating. The average target is $69.08.
Elsewhere, other analysts making target adjustments include:
* Scotia’s Robert Hope to $75 from $74 with a “sector outperform” rating.
“Overall, the update was largely in line with our expectations. We believe that TC Energy’s growth opportunities are becoming increasingly visible and numerous due to increasing natural gas demand (LNG exports, coal-to-gas conversions, power demand). Along with the update, the company sanctioned four small, easy-to-execute, high-return projects which speak directly to these growth tailwinds. Our 2025-2026 estimates increase slightly as we move up our Bruce income expectations. The higher estimates drive up our target price to $75 from $74. We believe TC Energy’s attractive business mix, highly contracted asset base, and visible growth profile warrant a premium valuation to its North American peers,” said Mr. Hope.
* BMO’s Ben Pham to $70 from $66 with a “market perform” rating.
“While the market may have been slightly disappointed with TRP’s 2024 investor day (shares lagged 87 basis points on the day), where the 2024E-2027E EBITDA CAGR is sliding down to 5-7 per cent vs. prior 2023-2026E 7 per cent, we believe growth could beat expectations,” said Mr. Pham. “The tone of the presentations were quite positive, project returns are trending higher, and visibility is improving to achieving the annual $6-7B run-rate net capex target. We are maintaining our Market Perform rating on recent trading levels, but increasing our target.”
* Barclays’ Theresa Chen to $74 from $67 with an “overweight” rating.
* CIBC’s Robert Catellier to $68 from $67 with a “neutral” rating.
“During its annual Investor Day, TC Energy reaffirmed its core principles to continue disciplined capital allocation and low-risk, repeatable performance with a solid growth outlook. Management’s plans to reduce capital spending and achieve deleveraging goals provide more flexibility. We maintain our Neutral rating but bump our DCF-based price target to $68,” he said.
* Jefferies’ Anthony Linton to $65 from $64 with a “hold” rating.