Zacks Investment Research downgraded pipeline operator
TC PipeLines LP ( TCP ) to a Zacks Rank
#4 (Sell) on Apr 10.DELEK LOGISTICS (DKL): Free Stock Analysis
ReportNUSTAR ENERGY (NS): Free Stock Analysis ReportSUMMIT MIDSTRM (SMLP): Free Stock Analysis
ReportTC PIPELINES (TCP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment
Why the Downgrade?
The Calgary, Alberta-based master limited partnership (MLP)
reported weaker-than-expected fourth-quarter 2012 results on Feb 8,
2013. Earnings per unit (EPU) came in at 56 cents, missing the
Zacks Consensus Estimate by 7 cents. Comparing year over year,
earnings fell 20.0% from the year-ago profit of 70 cents. The
disappointment resulted from lower transportation rates in the
Great Lakes along with low income from other pipeline
In fact, TC PipeLines' cash flows during the quarter were down
5.6% from the year-earlier level at $54.0 million. The decrease was
mainly on account of lower cash distributions from TC PipeLines'
interests in Gas Transmission Northwest LLC ("GTN") and the Great
Moreover, TC PipeLines delivered negative earnings surprises in
the last 6 quarters with an average miss of 6.42%.
A combination of all these factors has lowered earnings estimates
for TC PipeLines in the last 30 days. The Zacks Consensus Estimate
for first quarter of 2013 has gone down by 2.98% to 65 cents per
unit while for 2013, the estimate dropped 2.35% to $2.49 per
In the near-to-intermediate term, TC PipeLines is poised to suffer
from lower transportation rates on Northern Border and substantial
uncontracted capacity at Great Lakes. Moreover, with natural gas
fundamentals remaining weak, we do not foresee any price upside for
the TC PipeLines stock during the next few quarters.
We also remain concerned about lower spending by consumers and
businesses on transportation fuels, which hurt TC PipeLines' cash
flows and distributions. Additionally, we remain wary of cost
overruns on expansion projects (which result in lower
Other Stocks to Consider
Not all MLP's in the energy sector are performing as poorly as TC
PipeLines. The stocks of Delek Logistics Partners
LP ( DKL ),
NuStar Energy LP ( NS ) and Summit
Midstream Partners LP ( SMLP ) are worth
considering. All these carry a Zacks Rank #2 (Buy).