Shares of Targa Resources Corp. (TRGP - Free Report) have declined 2.8% since the second-quarter 2020 earnings announcement on Aug 6. Although the bottom line beat the Zacks Consensus Estimate, investors were spooked by the decrease in commodity sales and weaker-than-expected performance of its Logistics and Transportation segment.
Targa Resources reported second-quarter 2020 adjusted net income per share of 21 cents. The Zacks Consensus Estimate was for a loss of 14 cents and the year-ago loss was of 18 cents per share. The outperformance was led by strong volumes across the company’s Permian gathering and processing systems.
The company’s adjusted EBITDA climbed from $306.5 million a year earlier to $351.2 million in the second quarter of 2020.
However, total revenues of $1.5 billion were 24% lower than the year-ago quarter and missed the Zacks Consensus Estimate of $1.6 billion on lower commodity sales, which were down 24% year over year to $1.3 billion. Lower commodity prices also dragged down revenues.
Operational Performance
The Gathering and Processing segment recorded operating margin of $237.2 million during the quarter, up 2% from the $232.1 million achieved in the year-ago period and ahead of the Zacks Consensus Estimate of $214 million. Permian Basin volumes increased 19% year over year to 2,350.5 million cubic feet per day.
In the Logistics and Transportation (or the Downstream) segment, the company reported operating margin of $231.5 million, up 26% year over year. Targa Resources saw fractionation volumes rise from 512.5 thousand barrels per day to 579.3 thousand barrels per day, which is a 13% increase year over year. Moreover, export volumes were up 10% year over year. However, segment operating margin missed the Zacks Consensus Estimate of $261 million due to lower marketing margins and higher operating expenses.
DCF, Capex & Balance Sheet
Second-quarter 2020 distributable cash flow (“DCF”) was $273.7 million, 43% higher than $192 million in the year-ago period. Targa Resources paid out a dividend of 10 cents per share.
Targa Resources spent $142.8 million on growth capex, while its maintenance capex totaled $26.8 million.
As of Jun 30, 2020, the company had $196.2 million in cash and cash equivalents and $7.6 billion in long-term debt. Debt-to-capitalization was approximately 54.7%.
Guidance
Targa Resources reiterated its growth capital spending guidance of $700-$800 million for 2020. The company is still projecting full-year maintenance capex of approximately $130 million, while guiding for a reduction in operating and G&A expenses by more than $100 million.
With the upstream players starting to restore shut-in volumes in response to higher oil prices, Targa Resources now foresees full-year adjusted EBITDA of $1.5-$1.625 billion versus the prior guidance of $1.4-$1.625 billion.
Zacks Rank & Key Picks
Targa Resources carries a Zacks Rank #2 (Buy).
Apart from Targa Resources, investors interested in the energy space could also look at some other options like Murphy USA Inc. (MUSA - Free Report) , SilverBow Resources, Inc. (SBOW - Free Report) and Royal Dutch Shell plc . Murphy USA and SilverBow Resources sport a Zacks Rank #1 (Strong Buy), while Royal Dutch Shell carries a Zacks Rank #2.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The 2020 Zacks Consensus Estimate for Murphy USA indicates 134.2% earnings per share growth over 2019.
Over 30 days, SilverBow Resources has seen the Zacks Consensus Estimate for 2020 increase 21%.
Over 30 days, the Hague, Netherlands-based Shell has seen the Zacks Consensus Estimate for 2020 surge 141.9%.
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Shares of Targa Resources Corp. (TRGP - Free Report) have declined 2.8% since the second-quarter 2020 earnings announcement on Aug 6. Although the bottom line beat the Zacks Consensus Estimate, investors were spooked by the decrease in commodity sales and weaker-than-expected performance of its Logistics and Transportation segment.
Targa Resources reported second-quarter 2020 adjusted net income per share of 21 cents. The Zacks Consensus Estimate was for a loss of 14 cents and the year-ago loss was of 18 cents per share. The outperformance was led by strong volumes across the company’s Permian gathering and processing systems.
The company’s adjusted EBITDA climbed from $306.5 million a year earlier to $351.2 million in the second quarter of 2020.
However, total revenues of $1.5 billion were 24% lower than the year-ago quarter and missed the Zacks Consensus Estimate of $1.6 billion on lower commodity sales, which were down 24% year over year to $1.3 billion. Lower commodity prices also dragged down revenues.
Operational Performance
The Gathering and Processing segment recorded operating margin of $237.2 million during the quarter, up 2% from the $232.1 million achieved in the year-ago period and ahead of the Zacks Consensus Estimate of $214 million. Permian Basin volumes increased 19% year over year to 2,350.5 million cubic feet per day.
In the Logistics and Transportation (or the Downstream) segment, the company reported operating margin of $231.5 million, up 26% year over year. Targa Resources saw fractionation volumes rise from 512.5 thousand barrels per day to 579.3 thousand barrels per day, which is a 13% increase year over year. Moreover, export volumes were up 10% year over year. However, segment operating margin missed the Zacks Consensus Estimate of $261 million due to lower marketing margins and higher operating expenses.
DCF, Capex & Balance Sheet
Second-quarter 2020 distributable cash flow (“DCF”) was $273.7 million, 43% higher than $192 million in the year-ago period. Targa Resources paid out a dividend of 10 cents per share.
Targa Resources spent $142.8 million on growth capex, while its maintenance capex totaled $26.8 million.
As of Jun 30, 2020, the company had $196.2 million in cash and cash equivalents and $7.6 billion in long-term debt. Debt-to-capitalization was approximately 54.7%.
Guidance
Targa Resources reiterated its growth capital spending guidance of $700-$800 million for 2020. The company is still projecting full-year maintenance capex of approximately $130 million, while guiding for a reduction in operating and G&A expenses by more than $100 million.
With the upstream players starting to restore shut-in volumes in response to higher oil prices, Targa Resources now foresees full-year adjusted EBITDA of $1.5-$1.625 billion versus the prior guidance of $1.4-$1.625 billion.
Zacks Rank & Key Picks
Targa Resources carries a Zacks Rank #2 (Buy).
Apart from Targa Resources, investors interested in the energy space could also look at some other options like Murphy USA Inc. (MUSA - Free Report) , SilverBow Resources, Inc. (SBOW - Free Report) and Royal Dutch Shell plc . Murphy USA and SilverBow Resources sport a Zacks Rank #1 (Strong Buy), while Royal Dutch Shell carries a Zacks Rank #2.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The 2020 Zacks Consensus Estimate for Murphy USA indicates 134.2% earnings per share growth over 2019.
Over 30 days, SilverBow Resources has seen the Zacks Consensus Estimate for 2020 increase 21%.
Over 30 days, the Hague, Netherlands-based Shell has seen the Zacks Consensus Estimate for 2020 surge 141.9%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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