11.19
At TRP’s annual Investor Day, management went to great lengths to leave
investors with the message that the large committed capital program for
2009-2013 will begin to yield significant bottom line growth starting in
2011. This is consistent with our view and earnings forecasts (unchanged).
Committed capital expenditures from 2010 through 2013 amount to $16
bln., with the bulk of that ($11.2 bln.) in 2010/2011. Management affirmed
that there are no plans for equity funding in 2010/2011. Thereafter,
incremental cash flow should remove the need for new equity through 2013.
Management provided EBITDA guidance, consistent with our forecasts, that
indicates the bottom line will begin to accelerate in 2011. Our corresponding
EPS forecasts are as follows: 2009E-$2.06, 2010E-$2.10, 2011E-$2.41,
2012E-$2.45, 2013E-$2.95.
The back-end loaded EPS growth for 2009-2013 implies an opportunity to
acquire the stock at attractive valuations. 2013 EPS and net free cash flow
forecasts suggest a $55-$60 share price in the next 3 years. Patience,
however, may be required as the company works through 2010.
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