Targa Resources Partners LP

Targa Resources Partners LP is riding surging commodity prices to bigger profits as natural gas prices move higher. The company has surprised on earnings three out of the last four quarters by 80.63%. Targa Resources has a forward P/E of 13.68.

Full Analysis

Targa Resources Partners LP (NGLS - Snapshot Report) provides midstream natural gas and NGL services around the United States. The natural gas and NGL product services include gas gathering, processing, treating, fractionation, storage terminalling, and transportation.

The company, a Zacks #1 Rank (Strong Buy), owns or operates over 11,300 miles of natural gas gathering and NGL pipelines and 22 natural gas processing plants with over 10,250 MMcf/d of gross processing capacity in many of the large natural gas regions of the U.S. including in the Permian Basin, Fort Worth/Bend Arch Basin, South Louisiana Basin and the deepwater and the deep shelf of the Gulf of Mexico.

The company's strategy is to grow its current assets but is always looking for strategic acquisitions in the Gulf Coast, the Gulf of Mexico, Mid-Continent and Rocky Mountain regions.

Targa Resources Beat Wall Street First Quarter Estimates by 35.14%

Targa Resources surprised on first quarter earnings by 13 cents, reporting 50 cents per share versus analysts' estimates of 37 cents per share. Net income was $24.9 million compared with a net loss of $10.6 million in the first-quarter of 2007. The net loss in 2027 was primarily due to interest expense totaling $13.4 million.

Revenues rose 47% to $512.1 million from $348.8 million in 2007. Income from operations increased 63% to $33.9 million from $20.8 million in the year-ago period.

The company clearly benefited from higher commodity prices. The average realized natural gas price rose 19%, or $1.26 per MMBtu, to $7.91 from $6.76 per MMBtu in 2007.

Total Volumes Continue to Increase

Targa Resources said activity remains strong in all areas of its operations and total volumes continue to increase steadily. The expansion of the Chico plant's CO2 amine treater is under construction and should be online in the third quarter of 2008. For 2008, maintenance and expansion capital expenditures are expected to total approximately $60 million.

Analysts Raise Estimates on the Second Quarter and the Full Year

In response to the first-quarter earnings report, brokerage analysts have raised consensus estimates for the second quarter and the full year. Estimates rose 25% for the second quarter in just the last week. For the full year, estimates increased 42 cents to $1.82 from $1.40 per share. Earnings estimates for 2008 are up 67% in the last 90 days.

Targa Resources' 2008 P/E is 13.68. Its price-to-book is 1.66, under the industry average of 2.28. As an added bonus, the company also has a dividend yield of 6.70%.