Targa (TRGP) Q2 Earnings Surpass Estimates, Revenues Miss
Targa Resources TRGP reported second-quarter 2023 earnings of $1.44 per share, which beat the Zacks Consensus Estimate of $1.23. The outperformance could be attributed to strong volumes across its systems and low product costs in the reported quarter.
The bottom line deteriorated from the year-ago quarter’s level of $1.61. The year-over-year underperformance was due to lower commodity sales.
The company’s adjusted EBITDA for the second quarter totaled $789.1 million, up from $666.4 million in the prior-year period.
Distributable cash flow amounted to $575.8 million, about 8% higher than $533.4 million recorded a year ago.
Revenues totaled $3.4 billion, down 44% year over year. The top line also missed the Zacks Consensus Estimate of $4.6 billion.
Targa declared quarterly cash dividend of 50 cents per common share or $2.00 on an annualized basis for the second quarter of 2023. The dividend was paid out on Aug 15, 2022, to shareholders of record as of Jul 30, 2022.
Targa Resources, Inc. Price, Consensus and EPS Surprise
Targa Resources, Inc. price-consensus-eps-surprise-chart | Targa Resources, Inc. Quote
Operational Performance
Gathering and Processing: The segment recorded an operating margin of $502.5 million during the quarter, up 6% from $474.7 million recorded in the year-ago period.
This primarily reflects higher Permian Basin volumes that increased 62% year over year to an average of 5,065.1 million cubic feet per day.
Logistics and Transportation: This unit mainly reflects the company’s downstream operations. Its operating margin of $408 million increased 27% year over year.
The rise in adjusted operating margin was due to various factors, including increased marketing margin, greater volumes of pipeline transportation and fractionation. The higher marketing margin was a result of increased optimization opportunities.
TRGP’s fractionation volumes totaled 794.4 thousand barrels per day, up 8% from 737.2 recorded a year ago.
NGL pipeline transportation volumes were up 26% year over year, and NGL sales also improved 4% during the same time frame.
Costs, Capex & Balance Sheet
Targa incurred product costs of $2.1 billion in the second quarter, down 59% from the year-ago quarter’s level.
The company spent $579.5 million on growth capital programs compared with $199.3 million in the year-ago period.
As of Jun 30, 2023, TRGP had cash and cash equivalents of $169.4 million and long-term debt of $12.4 billion, with a debt-to-capitalization of around 73.2%.
Guidance
The company expects adjusted EBITDA in the $3.5-$3.7 billion range for 2023.
It also anticipates 2023 growth capital expenditures between $2 billion and $2.2 billion, with net maintenance capital spending of $175 million.
Zacks Rank and Key Picks
Currently, TRPG carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the energy sector are CVR Energy CVI, sporting a Zacks Rank #1 (Strong Buy), and Evolution Petroleum EPM and Archrock AROC, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is valued at around $3.67 billion. In the past year, its shares have risen 19.5%
CVI currently pays a dividend of $2 per share, or 5.47% on an annual basis. Its payout ratio currently sits at 30% of earnings.
Evolution Petroleum is worth approximately $320.71 million. EPM currently pays a dividend of 48 cents per share, or 4.98% on an annual basis.
The company currently has a forward P/E ratio of 8.93. In comparison, its industry has an average forward P/E of 14.60, which means EPM is trading at a discount to the group.
Archrock is valued at around $2.04 billion. It delivered an average earnings surprise of 15.08% for the last four quarters and its current dividend yield is 4.75%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CVR Energy Inc. (CVI) : Free Stock Analysis Report
Evolution Petroleum Corporation, Inc. (EPM) : Free Stock Analysis Report
Targa Resources, Inc. (TRGP) : Free Stock Analysis Report
Archrock, Inc. (AROC) : Free Stock Analysis Report
