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TC Energy stock gets price target boosts from RBC, CIBC

TC Energy has a number of important irons in the fire, including the spin-off of its liquids pipeline business, and the strategic sale of billions worth of non-core assets. (THE CANADIAN PRESS/Alex Panetta)
TC Energy has a number of irons in the fire, including the spin-off of its liquids pipeline business, and the strategic sale of billions worth of non-core assets. (THE CANADIAN PRESS/Alex Panetta) (The Canadian Press)

TC Energy’s (TRP.TO)(TRP) latest quarterly results have analysts boosting their price targets for shares of the Canadian pipeline operator.

On Monday, RBC Capital Markets analyst Robert Kwan raised his outlook for Toronto-listed TC Energy stock from $54 to $59, while maintaining an “outperformer” rating. On Friday, CIBC Capital Markets analyst Robert Catellier raised his target price to $56 per share from $55, keeping a “neutral” recommendation.

“TC Energy continues to build investor confidence coming out of what increasingly appears to be a low-point in August 2023,” Kwan wrote in a note to clients.

TC Energy reported fourth-quarter financial results before markets opened on Friday, ending what CEO François Poirier called one of the most transformational years in the company’s history, marked by multi-billion deals and challenges with key projects.

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The company still has important irons in the fire, including the spin-off of its liquids pipeline business, and the strategic sale of billions worth of non-core assets.

In mid-2024, TC Energy plans to hold a shareholder vote on spinning off its crude pipeline business. The new company will be called South Bow, and will remain headquartered in Calgary.

Speaking on a post-earnings conference call with analysts on Friday, Poirier said he's “open” to selling more than the previously announced minimum target of $3 billion in assets in 2024. He added that “many” discussions with potential buyers are in progress, featuring “compelling valuations.”

Poirier says investors should expect two to four transactions beginning in the first half of 2024. However, he insists he’s in no rush to cut deals, noting potentially cheaper borrowing costs later in the year could help TC Energy fetch better prices for its assets.

“The underlying interest rate environment does have an impact on valuation,” Poirier said. “It’s not lost on us that as monetary policy starts to ease in the second half of the year, we may benefit from that.”

Last October, TC completed the $5.3 billion sale of a 40 per cent non-controlling stake in its Columbia Gas and Columbia Gulf systems to New York-based Global Infrastructure Partners.

The company says it expects future deals will be smaller in terms of dollar value.

Other positives in the fourth quarter include a $200 million one-time incentive payment from LNG Canada for the mechanical completion of the 670-km Coastal GasLink project. Once in service, the line will ship natural gas from Western Canada to the country’s first international export facility on the British Columbia coast.

In Mexico, TC Energy says work on its Southeast Gateway Pipeline project is “on time and on budget,” with commercial in-service expected by mid-2025.

Last Friday, the company also touted progress on shrinking its debt load, which has been a key concern for investors and credit rating agencies.

"While by no means out of the woods, execution of the Southeast Gateway Pipeline construction appears to be tracking well (in contrast to how Coastal GasLink unfolded), and improving macro conditions bode well for the asset sale program," Kwan added. "Relative to other Canadian energy infrastructure companies that face execution challenges, we believe TC Energy has one of the more favourable risk-reward profiles."

For the fourth quarter, TC Energy says its comparable earnings per share were $1.35, up from $1.11 a year earlier. Revenue totalled $4.24 billion, up from $4.04 billion in the fourth quarter of 2022.

On Tuesday, Toronto-listed TC Energy shares were virtually flat, adding less than one per cent to $53.71 as at 11:40 a.m. ET.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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