TransCanada (TRP) versus Shell Midstream Partners (SHLX) Head to Head Contrast

TransCanada (NYSE: TRP) and Shell Midstream Partners (NYSE:SHLX) are both mid-cap oils/energy companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, dividends, profitability, earnings and risk.

Volatility & Risk

TransCanada has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500. Comparatively, Shell Midstream Partners has a beta of 1.16, suggesting that its share price is 16% more volatile than the S&P 500.

Profitability

This table compares TransCanada and Shell Midstream Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TransCanada 14.40% 11.99% 3.09%
Shell Midstream Partners 85.14% 3,826.80% 27.98%

Valuation and Earnings

This table compares TransCanada and Shell Midstream Partners’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TransCanada $9.44 billion 4.45 $175.96 million $1.55 30.88
Shell Midstream Partners $291.30 million 19.42 $244.90 million $1.26 23.91

Shell Midstream Partners has lower revenue, but higher earnings than TransCanada. Shell Midstream Partners is trading at a lower price-to-earnings ratio than TransCanada, indicating that it is currently the more affordable of the two stocks.

Dividends

TransCanada pays an annual dividend of $1.96 per share and has a dividend yield of 4.1%. Shell Midstream Partners pays an annual dividend of $1.27 per share and has a dividend yield of 4.2%. TransCanada pays out 126.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Shell Midstream Partners pays out 100.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TransCanada has raised its dividend for 2 consecutive years and Shell Midstream Partners has raised its dividend for 2 consecutive years. Shell Midstream Partners is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations and price targets for TransCanada and Shell Midstream Partners, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TransCanada 0 0 8 0 3.00
Shell Midstream Partners 0 3 4 0 2.57

TransCanada currently has a consensus target price of $60.00, indicating a potential upside of 25.37%. Shell Midstream Partners has a consensus target price of $33.86, indicating a potential upside of 10.83%. Given TransCanada’s stronger consensus rating and higher possible upside, equities analysts plainly believe TransCanada is more favorable than Shell Midstream Partners.

Institutional and Insider Ownership

56.8% of TransCanada shares are owned by institutional investors. Comparatively, 53.3% of Shell Midstream Partners shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Shell Midstream Partners beats TransCanada on 8 of the 15 factors compared between the two stocks.

TransCanada Company Profile

TransCanada Corporation is an energy infrastructure company. The Company is engaged in the development and operation of North American energy infrastructure, including natural gas and liquids pipelines, power generation and natural gas storage facilities. Its segments include Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Energy. The Company operates in three businesses: Natural Gas Pipelines, Liquids Pipelines and Energy. The Natural Gas Pipelines and Liquids Pipelines segments principally consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. The Energy segment includes its power operations and the non-regulated natural gas storage business in Canada. TransCanada PipeLines Limited (TCPL) is its principal operating subsidiary.

Shell Midstream Partners Company Profile

Shell Midstream Partners, L.P. is a master limited partnership company, which owns, operates, develops and acquires pipelines and other midstream assets. The Company conducts its operations through its subsidiary, Shell Midstream Operating, LLC. Its assets consist of interests in entities that own crude oil and refined products pipelines serving as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and to deliver refined products from those markets to demand centers. As of December 31, 2016, it owned interests in seven crude oil pipeline systems, three refined products systems, one natural gas gathering pipeline system and a crude tank storage and terminal system. Its pipeline and terminal systems include Zydeco crude oil system, Auger crude oil system, Mars crude oil system, Bengal product system, Poseidon crude oil system, Odyssey crude oil system, Proteus crude oil system and Endymion crude oil system.

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