Morningstar | TransCanada Remains Deeply Undervalued. See Updated Analyst Note from 03 Jan 2019
We are lowering our U.S. fair value estimate for TransCanada to $54 per share from $55 based on foreign exchange rate changes, but we are maintaining our CAD 72 fair value estimate and narrow moat rating. With its 4-star rating, TransCanada's stock offers 40% upside and an attractive 6.0% forward dividend yield. The market continues to overlook the positive impact that the growth portfolio will have on cash flows and the balance sheet, and it places too much emphasis on less important outside factors such as the widening of the heavy oil discount, the Federal Energy Regulatory Commission's proposed tax regulations, and rising interest rates. The time is right for long-term investors to capitalize on the stock's considerable upside while collecting a steady stream of growing income.For a deeper dive into TransCanada and what the market is missing about the stock, see our April Select report, "What the Market Is Missing on Keystone's Impact on TransCanada."
For a detailed look into the Canadian crude and pipeline trends, see our September Energy Observer, "Don't Overlook Oil Sands: Falling Costs and More Infrastructure Will Make Canadian Production Globally Competitive."
TransCanada is an energy company. Co. operates three business segments: natural gas pipeline, which transports natural gas across Canada, the U.S. and Mexico, and has regulated natural gas storage facilities in Michigan with a total capacity of 250 billion cubic ft.; liquids pipelines, which consists of wholly-owned and operated crude oil pipeline systems that connects Alberta and U.S. crude oil supplies to U.S. refining markets, as well as connecting U.S. crude oil supplies from the Cushing, OK hub to refining markets in the U.S Gulf Coast; and energy, which includes a portfolio of power generation assets in Canada and the U.S., and unregulated natural gas storage assets in Alberta.
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