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What to Watch When TransCanada Reports Q4 Results

By Matthew DiLallo – Updated Apr 17, 2019 at 7:00AM

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The Canadian energy infrastructure giant expects to release its results on Thursday morning.

TransCanada (TRP 0.03%) is in the midst of a major expansion phase, having invested a massive 10.5 billion Canadian dollars ($7.9 billion) into capital projects last year. Several of those expansions have already come on line, which helped drive strong earnings and profit growth during the third quarter. That trend should have continued during the fourth quarter, and it's one of a couple of things investors should keep an eye on when the Canadian energy infrastructure giant reports results later this week.

See if the company's growth engine continued delivering results

TransCanada's earnings and cash flow grew by a low-double-digit rate through the first nine months of 2018 compared to the same period in 2017. That healthy growth should have carried over to the fourth quarter because the company completed several more expansion projects, including both phases of the $900 million WB XPress project, as well as part of its $3 billion Mountaineer XPress pipeline.

A person in a hard hat standing near a stack of pipelines.

Image source: Getty Images.

One item, however, to keep an eye on is any impact from the recent issues that the company has had on some of its pipelines. In December, for example, disruptions impacted TransCanada's Keystone pipeline and Enbridge's (ENB 0.18%) Mainline system. The issue caused a temporary shutdown of Keystone while reducing flows on Enbridge's pipeline. Meanwhile, a recent leak caused a shutdown of Keystone and Enbridge's Platte pipeline earlier this month. Given those issues, investors should see if they had any noticeable impact on the company's financial results either during the fourth quarter or the current one.

Check out the company's progress on lining up funding

TransCanada had CA$36 billion ($27.2 billion) of expansion projects underway as of the end of last year, along with another CA$20 billion ($15.1 billion) in development. That backlog is much larger than the company's ability to self-fund growth with excess cash after the dividend is paid. Because of that, the pipeline company has been working hard to bridge its funding gap.

TransCanada recently agreed to sell a natural gas-fired power plant in Arizona for $465 million, which will help in that cause. However, the company likely will need to sell additional non-core assets to help fund expansions so that its debt level doesn't get out of control. In light of that, investors should see if the company announces any more divestitures or sets a target for sales in 2019.

TransCanada has also launched efforts to find funding partners for two large-scale pipeline projects, Coastal GasLink and Keystone XL. Investors should see if the company made any progress in securing partners for either of those projects.

Finally, investors should check out what the company plans to do with its MLP TC Pipelines (TCP), which it had intended to use as a funding vehicle until a rule change no longer made selling assets to the entity a viable option. TransCanada could look to take TC Pipelines private, which is the alternative Enbridge chose for its various publicly traded entities.

Expecting the growth engine to continue accelerating

TransCanada completed several large-scale expansion projects last year, which should have enabled it to deliver strong growth during the fourth quarter. The company expects that to continue over the next several years as it plans to invest tens of billions of dollars to build additional expansions, as long as it can secure the necessary funding. It's unclear how the company will meet those financing needs since they far outstrip its internal sources, which is why investors will need to monitor its progress in bridging that gap throughout the coming year.

Check out the latest earnings call transcripts for companies we cover.    

Matthew DiLallo owns shares of Enbridge. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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