Houston, Texas-based Targa Resources Corp. (TRGP) owns, operates, acquires, and develops a portfolio of complementary domestic midstream infrastructure assets. Valued at a market cap of $44.6 billion, the company primarily derives its revenues from gathering, compressing, treating, processing, and selling natural gas.
Shares of this energy company have significantly outpaced the broader market over the past 52 weeks. Targa Resources has rallied 131.1% over this time frame, while the broader S&P 500 Index ($SPX) has gained 23.5%. Moreover, on a YTD basis, the stock is up 14.5%, compared to SPX’s 4% rise.
Narrowing the focus, TRGP’s outperformance looks even more pronounced when compared to the Energy Select Sector SPDR Fund’s (XLE) 7.6% return over the past 52 weeks and 4.7% gain on a YTD basis.
Shares of TRGP soared 4.9% after its Q3 earnings release on Nov. 5 despite delivering weaker-than-expected revenues of $3.9 billion. Moreover, the top line declined 1.1% from the year-ago quarter due to lower natural gas prices and the unfavorable impact of hedges. However, its earnings advanced 80.4% year-over-year to $1.75 per share and topped Wall Street’s expectations by a notable 10.7%. Strong Permian Basin volumes, robust Natural Gas Liquid (NGL) sales, and lower product costs led to its impressive bottom-line performance.
Additionally, the company expects 2024 adjusted EBITDA to exceed the top end of its prior $3.95 billion to $4.05 billion range. This might have further bolstered investor confidence.
For the fiscal year, which ended in December, analysts expect Targa's EPS to grow 73.8% year over year to $6.36. The company’s earnings surprise history is mixed. It surpassed the Wall Street estimates in two of the last four quarters while missing on two other occasions.
Among the 19 analysts covering the stock, the consensus rating is a “Strong Buy,” which is based on 17 “Strong Buy,” one “Moderate Buy,” and one “Hold” rating.
This configuration is slightly more bullish than three months ago, with 16 analysts suggesting a “Strong Buy” rating.
On Jan. 13, Barclays maintained an “Overweight” rating on TRGP and raised its price target to $204. As of writing, the company is slightly trading above this price target.
The mean price target of $216.95 represents a 6.1% upside from Targa’s current price levels, while the Street-high price target of $246 suggests an upside potential of 20.3%.
