Targa's (TRGP) Q3 Earnings and Revenues Miss Estimates
Targa Resources Corp. TRGP reported third-quarter 2023 earnings of 97 cents per share, which missed the Zacks Consensus Estimate of $1.17. The underperformance could be attributed to lower commodity sales and expenses related to TRGP's acquisition of its remaining stake in the Grand Prix NGL pipeline.
The bottom line surged from the year-ago quarter’s level of 84 cents due to strong volumes across its systems and low product costs in the reported quarter.
Revenues totaled $3.9 billion, down 27.8% year over year. The top line also missed the Zacks Consensus Estimate of $5.1 billion.
The company’s adjusted EBITDA for the third quarter totaled $840.2 million, up from $768.6 million in the prior-year period.
Distributable cash flow amounted to $602.2 million, about 1.2% higher than $594.9 million recorded a year ago.
Targa declared a quarterly cash dividend of 50 cents per common share or $2.00 on an annualized basis for the third quarter of 2023. The dividend will be paid out on Nov 15, 2023, to shareholders of record as of Oct 31, 2023.
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 $505 million, down 10.6% from $564.6 million recorded in the year-ago period.
This primarily reflects higher Permian Basin volumes that increased 23.4% year over year to an average of 5,052.3 million cubic feet per day.
Logistics and Transportation: This unit mainly reflects the company’s downstream operations. Its operating margin of $457.4 million increased 34.5% year over year.
The rise was due to various factors, including increased marketing margin and higher volumes of pipeline transportation and fractionation. The higher marketing margin was a result of increased optimization opportunities.
TRGP’s fractionation volumes totaled 793.4 thousand barrels per day, up 6.9% from 742.1 recorded a year ago.
NGL pipeline transportation volumes were up 32% year over year, and NGL sales also improved 21% during the same time frame.
Costs, Capex & Balance Sheet
Targa incurred product costs of $2.7 billion in the third quarter, down 38% from the year-ago quarter’s level.
The company spent $593.6 million on growth capital programs compared with $304.1 million in the year-ago period.
As of Sep 30, 2023, TRGP had cash and cash equivalents of $139.5 million and long-term debt of $12.3 billion, with a debt-to-capitalization of around 74.7%.
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 $200 million.
Zacks Rank and Key Picks
Currently, TRGP carries a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like Liberty Energy Inc. LBRT, sporting a Zacks Rank #1 (Strong Buy), and CVR Energy, Inc. CVI and Delek US Holdings, Inc. DK, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Liberty Energy is valued at $3.19 billion. LBRT currently pays a dividend of 20 cents per share, or 1.06% on an annual basis.
LBRT is a leading provider of hydraulic fracturing and other auxiliary services to North American onshore exploration and production companies.
CVR Energy is valued at $3.04 billion. In the past year, its shares have lost 23.7%.
CVI currently pays a dividend of $2 per share or 6.61% on an annual basis. Its payout ratio currently sits at 30% of earnings.
Delek US Holdings is worth approximately $1.64 billion. DK currently pays a dividend of 96 cents per share, or 3.75% on an annual basis.
The company operates in the integrated downstream energy business in the United States. It operates under three segments — refining, logistics and retail.
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