TC PipeLines, LP (TCLP) recently delivered its fifth consecutive positive earnings surprise, prompting analysts to raise their estimates significantly higher. It is a Zacks #1 Rank (Strong Buy) stock.
TCLP has also been steadily raising its distribution over the last decade. It currently yields a hefty 6.2%.
About TCLP
TC PipeLines, LP is a Master Limited Partnership with over 3,900 miles of natural gas pipelines in the U.S. and Eastern Canada. TC PipeLines is managed by its general partner, TC PipeLines GP, Inc., which is a wholly-owned subsidiary of TransCanada Corporation (TRP).
First Quarter Results
On April 26, TC PipeLines reported first quarter earnings per distributable unit of 90 cents, beating the Zacks Consensus Estimate by 14%. It was a 27% increase over the same quarter in 2010.
Cash flow rose 31% year-over-year to $48.3 million as the partnership continues to experience strong demand for its pipeline’s transportation services.
Equity income from its Northern Border investment soared 41% due to higher transmission revenues, while equity income from its Great Lakes investment rose 10%.
Outlook
Analysts revised their estimates significantly higher off the strong quarter, with the Zacks Consensus Estimate for 2011 jumping from $2.99 to $3.31. This is 14% higher than 2010 earnings per unit.
The 2012 consensus estimate jumped from $3.01 before the earnings release to $3.32.
Estimates have been soaring over the past several months as TCLP has delivered 5 consecutive positive earnings surprises:
It is a Zacks #1 Rank (Strong Buy) stock.
Income
Since it is an MLP, TC PipeLines pays out a majority of its earnings to unitholders through distributions. The partnership has raised this distribution at an average annual rate of 4.9% over the last 10 years:
It currently yields an attractive 6.2%.
The stock has fallen a bit since the partnership announced that it was issuing 6,300,000 common units in an underwritten public offering to fund an acquisition.
This pullback is likely temporary, however, and may represent a great entry point for investors. The stock is trading at 14.6x forward earnings, a significant discount to the industry average of 21.3x.
Its price to book ratio of 2.0 is also below the peer group multiple of 2.2.
TC PipeLines, LP has a market cap of $2.2 billion. It was founded in 1998 and is headquartered in Houston, Texas.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
TC PIPELINES (TCLP): Free Stock Analysis Report
Zacks Investment Research
