TC Energy’s SWOT analysis: natural gas giant’s stock poised for steady growth

TC Energy Corporation, a major player in the North American energy infrastructure sector, continues to demonstrate resilience through its extensive network of regulated and contracted assets. With a significant project pipeline and strategic focus on natural gas infrastructure, the company has positioned itself for consistent growth in the coming years. This analysis examines TC Energy’s current position, growth strategy, and financial outlook based on recent analyst assessments.

Business Overview and Performance

TC Energy operates a vast network of energy infrastructure assets across North America, with 97% of its portfolio consisting of regulated and contracted premium pipes and power assets. This business model provides stability and predictable cash flows, which analysts view favorably in the current economic environment.

The company’s first-quarter 2025 results demonstrated the strength of this business model. TC Energy reported adjusted EBITDA of $2,709 million for Q1/25, aligning with consensus expectations and slightly exceeding some analysts’ estimates. The performance was driven by strong asset utilization across its natural gas pipeline operations in Canada, the United States, and Mexico.

A significant development in TC Energy’s operations is the imminent service placement of the Strategic Gas Pipeline (SGP), expected to occur in May 2025. The company has implemented a toll adjustment mechanism to mitigate earnings impacts from the delayed in-service date of this project, showing proactive management of potential disruptions.

Growth Strategy and Capital Allocation

TC Energy’s growth strategy centers on low-risk brownfield expansions within its extensive gas network. This approach allows the company to leverage existing infrastructure while minimizing development risks typically associated with greenfield projects.

The company’s secured project backlog has increased to $28 billion, with recent additions including the Northwoods project and Bruce Unit 5 MCR. During Q1/25, TC Energy sanctioned a new data center-linked project, reflecting its adaptation to emerging energy demand trends and supporting its $6-7 billion net annual capital expenditure target.

Analysts anticipate an increased pace of project sanctioning in the second half of 2025 and into 2026, particularly as the company pursues opportunities related to gas-to-power projects in both the US and Canada. This project pipeline is expected to support consistent long-term share price appreciation through the end of the decade.

Financial Outlook and Projections

TC Energy has reiterated its 2025 guidance, projecting adjusted EBITDA of $10.7-10.9 billion. The company expects earnings per share to remain below the 2024 figure of $4.27, reflecting ongoing investments in growth projects.

For the fiscal years ahead, analysts project earnings per share of approximately 3.32-3.53 for FY1 and 3.58-3.71 for FY2, indicating modest but steady growth. Some analysts have slightly increased their 2025 adjusted EBITDA estimates to $11,108 million following the Q1 results.

The company maintains a focus on strengthening its balance sheet, with a commitment to achieving a 4.75x debt/EBITDA target. This deleveraging initiative, combined with executing existing capital projects, forms a key part of TC Energy’s financial strategy.

TC Energy offers a dividend yield of 4.9%, with a price-to-book value of 2.9x. The company’s market capitalization ranges between CAD 72-74 billion, reflecting its significant presence in the energy infrastructure sector.

Regulatory and Commercial Developments

TC Energy continues to advance its rate cases, with new rates expected to take effect on November 1, 2025. These regulatory developments, combined with the onset of toll collections on the Strategic Gas Pipeline and a full quarter of higher rates on the Columbia network, are anticipated to drive growth in the company’s results.

The company’s higher exposure to natural gas pipeline assets is viewed favorably given current market trends. Analysts are particularly interested in updates regarding commercialization efforts for potential gas-to-power projects, which could provide additional growth avenues.

Bear Case

Could increased capital expenditures strain TC Energy’s balance sheet?

TC Energy’s ambitious capital program, targeting $6-7 billion in annual net expenditures, raises questions about potential balance sheet pressure. While the company has committed to achieving a 4.75x debt/EBITDA target, the path to this goal could be challenging if project costs exceed expectations or if economic conditions deteriorate.

With a secured project backlog of $28 billion and expectations for increased project sanctioning in late 2025 and 2026, capital discipline will be crucial. The company’s net debt stands at approximately $60 billion, a substantial figure that requires careful management. Any significant increase in capital expenditures beyond planned levels could potentially delay deleveraging efforts and impact financial flexibility.

Is TC Energy’s premium valuation justified given its modest growth outlook?

TC Energy trades at a premium valuation compared to some peers, with a price-to-book value of 2.9x. This premium reflects the stability of its largely regulated business model and consistent dividend yield of 4.9%. However, the projected earnings growth remains relatively modest, with EPS estimates suggesting single-digit growth rates.

The company’s Q1/25 adjusted EPS came in below consensus expectations, raising questions about whether the current valuation fully accounts for execution risks and the time required for new projects to contribute meaningfully to earnings. While the company has a strong track record and substantial backlog, investors must consider whether the premium valuation leaves sufficient upside potential, particularly if project delays or regulatory challenges emerge.

Bull Case

How will the Strategic Gas Pipeline and toll collections impact TC Energy’s growth trajectory?

The Strategic Gas Pipeline represents a significant growth catalyst for TC Energy. With service commencement expected in May 2025, this project will begin generating revenue through toll collections, directly enhancing the company’s financial performance. The implementation of a toll adjustment mechanism demonstrates management’s proactive approach to ensuring projected earnings despite the slight delay in the in-service date.

Beyond the immediate impact of the SGP, the project reinforces TC Energy’s strategic positioning in natural gas infrastructure. As North America continues its energy transition, natural gas remains a critical component, serving as both a primary energy source and a complement to renewable generation. The SGP strengthens TC Energy’s extensive gas network, potentially creating opportunities for additional brownfield expansions and interconnections that leverage this core infrastructure.

Does TC Energy’s highly regulated business model provide sufficient stability in volatile energy markets?

TC Energy’s business model, with 97% of assets being regulated or contracted, creates a foundation of predictable cash flows that few competitors can match. This structure effectively insulates the company from short-term commodity price volatility and demand fluctuations, providing earnings visibility that supports both dividend stability and capital allocation planning.

The regulated nature of the business also creates a favorable environment for capital deployment. Projects typically have clearly defined returns established through regulatory processes, reducing investment uncertainty. This model has proven particularly valuable during periods of market volatility, allowing TC Energy to maintain consistent performance while more commodity-exposed energy companies experience significant earnings fluctuations.

The company’s strong natural gas pipeline asset utilization across Canada, the US, and Mexico further demonstrates the resilience of this business model. Even with modest seasonal headwinds, the regulated framework ensures stable performance, making TC Energy an attractive option for investors seeking reliable returns in the energy sector.

SWOT Analysis

Strengths

• 97% regulated and contracted premium assets ensuring stable cash flows
• Extensive gas network footprint across North America
• Strong asset utilization in Canadian, US, and Mexican operations
• Robust project backlog of $28 billion supporting long-term growth
• Consistent dividend yield of 4.9%

Weaknesses

• Delayed SGP project requiring toll adjustment mechanism
• Q1/25 adjusted EPS below consensus expectations
• Premium valuation potentially limiting upside potential
• High debt levels necessitating ongoing deleveraging focus
• EPS growth projections remain modest

Opportunities

• Commercialization of gas-to-power projects in US and Canada
• Emerging data center-linked energy infrastructure projects
• Low-risk brownfield expansions leveraging existing network
• Favorable power demand outlook in the US market
• Potential for increased project sanctioning in H2 2025 and 2026

Threats

• Potential capital expenditure increases affecting leverage targets
• Seasonal headwinds impacting quarterly performance
• Execution risks for complex infrastructure projects
• Regulatory changes affecting rates and returns
• Competition for new infrastructure development opportunities

Analysts Targets

• Barclays Capital Inc. - November 7th, 2025 - Overweight - CAD 80.00
• Barclays Capital Inc. - July 14th, 2025 - Overweight - CAD 74.00
• Barclays Capital Inc. - May 2nd, 2025 - Overweight - CAD 74.00
• RBC Capital Markets - May 2nd, 2025 - Outperform - CAD 74.00
• BMO Nesbitt Burns Inc. - May 2nd, 2025 - Market Perform - CAD 71.00

This analysis is based on information available through November 7th, 2025, and reflects the collective assessments of multiple financial institutions regarding TC Energy’s business outlook, financial performance, and growth prospects.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on TRP. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore TRP’s full potential at InvestingPro.

Should you invest in TRP right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if TRP is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate TRP further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if TRP appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.