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Goldman Sachs Downgrades TransCanada Corporation (TRP) to Sell

September 15, 2014 7:48 AM EDT
Get Alerts TRP Hot Sheet
Price: $40.28 +0.17%

Rating Summary:
    9 Buy, 8 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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Goldman Sachs downgraded TransCanada Corporation (NYSE: TRP) from Neutral to Sell with a price target of $47.00. Analyst Theodore Durbin noted high valuation compared to peers.

"TRP has outperformed large-cap peers by 12% since the end of 2Q14, partly driven by investor views of break-up potential. Our SOTP suggests this thesis is overdone at current valuation given (1) fundamental headwinds in its core natural gas pipeline business and (2) excessive optimism over its backlog given sub-10% returns on 2/3 of its projects and elevated regulatory and execution risk. TRP shares appear expensive on various metrics after recent outperformance," said Durbin.

"We expect TRP to underperform peers due to (1) increasing supply growth from Marcellus/Utica shales which increases volume and tariff risk on TRP’s gas assets (2) relatively weak earnings growth due to its below-average returns on projects (3) recurring execution and volatility issues in its Energy segment and (4) expensive valuation leaving shares vulnerable to negative regulatory or volume developments. Our unchanged 2014 2017 EBITDA estimates are 2-3% above consensus, but our call is more valuation-driven," he added.

For an analyst ratings summary and ratings history on TransCanada Corporation click here. For more ratings news on TransCanada Corporation click here.

Shares of TransCanada Corporation closed at $53.68 yesterday.



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