Reviewing Archrock (AROC) & TC Pipelines (TCP)

Archrock (NYSE: TCP) and TC Pipelines (NYSE:TCP) are both oils/energy companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, earnings, profitability, institutional ownership, dividends and analyst recommendations.

Dividends

Archrock pays an annual dividend of $0.53 per share and has a dividend yield of 4.4%. TC Pipelines pays an annual dividend of $2.60 per share and has a dividend yield of 8.0%. Archrock pays out -265.0% of its earnings in the form of a dividend. TC Pipelines pays out 82.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TC Pipelines has raised its dividend for 8 consecutive years. TC Pipelines is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings for Archrock and TC Pipelines, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Archrock 0 2 5 0 2.71
TC Pipelines 3 6 0 0 1.67

Archrock currently has a consensus price target of $14.63, indicating a potential upside of 22.38%. TC Pipelines has a consensus price target of $45.38, indicating a potential upside of 39.40%. Given TC Pipelines’ higher probable upside, analysts plainly believe TC Pipelines is more favorable than Archrock.

Earnings & Valuation

This table compares Archrock and TC Pipelines’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Archrock $794.66 million 1.95 $18.95 million ($0.20) -59.75
TC Pipelines $422.00 million 5.50 $252.00 million $3.16 10.30

TC Pipelines has lower revenue, but higher earnings than Archrock. Archrock is trading at a lower price-to-earnings ratio than TC Pipelines, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Archrock and TC Pipelines’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Archrock 4.19% 0.45% 0.14%
TC Pipelines 66.44% 26.67% 8.14%

Volatility & Risk

Archrock has a beta of 2.92, meaning that its stock price is 192% more volatile than the S&P 500. Comparatively, TC Pipelines has a beta of 1.22, meaning that its stock price is 22% more volatile than the S&P 500.

Insider & Institutional Ownership

99.7% of Archrock shares are owned by institutional investors. Comparatively, 61.5% of TC Pipelines shares are owned by institutional investors. 2.5% of Archrock shares are owned by insiders. Comparatively, 0.1% of TC Pipelines shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

TC Pipelines beats Archrock on 10 of the 17 factors compared between the two stocks.

About Archrock

Archrock, Inc. engages in the natural gas contract operations services business in the United States. The company provides natural gas compression services to customers in the oil and natural gas industry. It also offers aftermarket services, such as parts and components; and operation, maintenance, overhaul, and reconfiguration services to customers who own compression equipment. The company was formerly known as Exterran Holdings, Inc. and changed its name to Archrock, Inc. in November 2015. Archrock, Inc. was founded in 1990 and is headquartered in Houston, Texas.

About TC Pipelines

TC PipeLines, LP acquires, owns, and participates in the management of energy infrastructure businesses in North America. The company has interests in eight natural gas interstate pipeline systems that transport approximately 10.4 billion cubic feet per day of natural gas from producing regions and import facilities to market hubs and consuming markets primarily in the Western, Midwestern, and Eastern United States. It serves large utilities, local distribution companies, natural gas marketers, producing companies, and other interstate pipelines, including affiliates. TC PipeLines GP, Inc. operates as a general partner of the company. TC PipeLines, LP was founded in 1998 and is based in Houston, Texas.

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