TransCanada: Politics, pipelines and profits
The company is on track for growth -- with or without approval of the Keystone XL pipeline.
TransCanada Corp. (TRP) has underperformed every other North American pipeline company since early November 2011.
That's when the Obama administration officially put the company's Keystone XL project on hold. Despite this move, we view the stock as a core holding in our model growth portfolio.
The $7.6 billion extension to the existing Keystone Pipeline System would be an expressway for Canada's immense tar sands to U.S. Gulf Coast refineries.
It enjoys strong support from Republicans, as well as labor unions, but it's bitterly opposed by the environmental lobby. The president has avoided choosing between these key constituencies until after the Nov. 6 elections.
Ironically, TransCanada is on track for strong growth with or without Keystone XL. Fourth-quarter earnings surged 35.9% on a 15% boost in sales, fueled by roughly $10 billion in energy midstream assets placed into service since mid-2010.
Management anticipates bringing another $12 billion worth of assets into service by early 2015, including the restart of the Bruce Power nuclear plant in Ontario, extensions/expansions of its Alberta pipeline system and massive wind and solar projects that will sell power under lucrative contracts.
Building Keystone XL would be a major upside catalyst for TransCanada's earnings, dividends and share price. But even without it, the company will have no problem matching its recent 5% dividend increase.
The Bruce Plant, for example, is on budget and will generate up to 25% of Ontario's electricity under a long-term contract, starting in the second half of 2012.
During the company's fourth-quarter conference call CEO Russell Girling cited more than $50 billion in potential future energy infrastructure projects.
This is nearly twice the company's current market capitalization and will fire up low-risk growth to the end of the decade and beyond. Buy and lock this one away up to $45.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The next half-decade could bring dozens of new potential blockbuster treatments to the market.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.