TRP: Extended 2028 Outlook And Project Execution Will Shape Medium Term Returns

Our analyst price target for TC Energy edges up by about C$0.40 to roughly C$79.20, reflecting Street analysts' higher targets in the C$78 to C$84 range and their view that the company has a solid pipeline of projects and medium term opportunities.

Analyst Commentary

Bullish Takeaways

Bullish analysts see the recent upgrade and higher price targets, in the C$78 to C$84 range, as aligned with TC Energy's current project backlog and medium term plan. They view this as supporting upside potential versus recent trading levels.
The confirmation of FY25 guidance, alongside an extended outlook to 2028, is viewed as a sign of planning discipline that can help investors assess execution risk and align expectations with the company's medium term targets.
References to a "robust set of opportunities through the end of the decade" suggest that the project pipeline and ongoing execution are key parts of the bullish case for the shares, particularly for investors focused on long duration cash flow visibility.
Bullish analysts point to potential upside relative to the company's own medium term targets, which they see as a positive input into valuation and a reason to support higher target prices.

Bearish Takeaways

While targets have moved higher, the clustering of estimates in a relatively tight C$78 to C$84 band implies that some analysts see the current valuation as already reflecting a meaningful portion of the medium term opportunity set.
The reliance on execution of a multi year project slate, and on the company meeting its extended guidance through 2028, leaves limited room for missteps before investors start to question the assumptions behind these target prices.
References to an "in line" Q3 earnings report suggest that, for more cautious analysts, recent results do not yet provide a clear catalyst. These analysts may focus on the risk that future project or regulatory developments could pressure valuation.
Medium term targets and guidance extending to 2028 can also be viewed as a source of uncertainty for more cautious investors, who may prefer clearer visibility on capital allocation, balance sheet impact, and realized returns before assigning higher valuations.

What's in the News

TC Energy Corporation (TSX:TRP.PRG) was dropped from the S&P/TSX Preferred Share Index. This change may affect how certain index tracking funds and benchmarked investors hold the preferred shares (Key Developments).

Valuation Changes

Fair Value: moves modestly from CA$78.77 to CA$79.18, representing a small upward adjustment in the model output.
Discount Rate: edges from 6.55% to about 6.56%, reflecting a very slight change in the rate used to assess future cash flows.
Revenue Growth: shifts from roughly 5.72% to 5.74%, indicating a small tweak to the projected growth assumption.
Net Profit Margin: adjusts fractionally from about 25.28% to 25.26%, indicating a minimal change in expected profitability levels.
Future P/E: moves from about 21.78x to 21.90x, representing a slight increase in the valuation multiple applied to forward earnings in the model.

Investor optimism may be misplaced due to underestimated risks from energy transition trends, stricter climate policies, and declining long-term demand for fossil fuels.
Ongoing capital needs, regulatory challenges, and potential contract instability could threaten project economics, asset utilization, and overall financial stability.
Strong asset base, stable earnings, disciplined growth, and ESG initiatives position TC Energy for resilient performance and expanding opportunities in a changing energy landscape.

Catalysts

About TC Energy

Operates as an energy infrastructure company in North America.What are the underlying business or industry changes driving this perspective?

Investors may be overestimating TC Energy's long-term revenue and EBITDA growth by assuming that the current surge in North American natural gas demand-driven by LNG export growth, coal-to-gas conversions, data center buildouts, and electrification-will persist at elevated rates, despite mounting global pressures for renewables and potential demand destruction for fossil fuels over the long run.
Market optimism around new project announcements and sanctioned capacity additions may be ignoring structural risks from stricter climate policies and possible future carbon pricing, which could increase regulatory costs and compress net margins for pipeline operators like TC Energy.
There is excessive confidence in the long-term stability of rate-regulated or take-or-pay contracts; however, longer-term secular shifts toward decarbonization and capital flight from fossil fuel infrastructure could result in lower asset utilization and impair TC Energy's ability to renew or replace contracts at current terms, impacting revenues and earnings stability.
The expected cadence of brownfield expansions and the associated capital-efficient returns may prove unsustainable if advancements in alternative energy storage, electrification, or declines in North American gas production reduce system throughput, challenging future revenue growth and project economics.
Investors may be underappreciating the long-term impact of elevated leverage and ongoing capital expenditure needs, especially if future project execution is delayed or faces cost overruns due to regulatory, legal, or stakeholder challenges; this increases the risk profile and could drive higher interest costs, weaker net margins, and potential credit rating pressure.

TC Energy Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming TC Energy's revenue will grow by 6.3% annually over the next 3 years.
Analysts assume that profit margins will shrink from 29.7% today to 23.4% in 3 years time.
Analysts expect earnings to reach CA$4.0 billion (and earnings per share of CA$4.01) by about September 2028, down from CA$4.2 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.5x on those 2028 earnings, up from 17.6x today. This future PE is greater than the current PE for the CA Oil and Gas industry at 12.2x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.04%, as per the Simply Wall St company report.

TC Energy Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Structural long-term growth in North American natural gas demand, driven by increased LNG exports, electrification, coal-to-gas conversions, and rapidly expanding data center and industrial loads, positions TC Energy to benefit from greater asset utilization and expanded project opportunities-supporting top-line revenue growth.
Robust backlog of brownfield, capital-efficient projects with higher average unlevered after-tax IRRs (up to 12%), take-or-pay contracts, and sanctioned returns underpins predictability in future earnings and supports net margin stability.
Long-lived, regulated pipeline assets and high barriers to entry (including incumbent market positions and customer relationships) enable TC Energy to secure long-term contract renewals, shielding revenues and earnings from competitive and regulatory shocks.
Active balance sheet optimization, marked by successful project execution, deleveraging targets (aiming for 4.75x by 2026), and disciplined capital allocation, improves financial resilience and could support sustained or growing dividends-positively impacting earnings and shareholder value.
Strategic investments in emissions reduction, renewable natural gas, nuclear (e.g., Bruce Power), and ongoing partnerships position the company to access ESG-focused capital, maintain its social license, and diversify revenue streams-potentially leading to steady or increasing net margins over the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$73.952 for TC Energy based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$80.0, and the most bearish reporting a price target of just CA$59.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$17.2 billion, earnings will come to CA$4.0 billion, and it would be trading on a PE ratio of 23.5x, assuming you use a discount rate of 7.0%.
Given the current share price of CA$71.88, the analyst price target of CA$73.95 is 2.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on TC Energy?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

TRP: Share Performance Will Reflect Rising Margins Amid Cautious Sector Outlook