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Targa Resources (TRGP) Surges 48.1% Since Q3 Earnings Beat

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Shares of Targa Resources Corp. (TRGP - Free Report) have rallied 48.1% since third-quarter 2020 earnings announcement on Nov 5. Investors lauded the company’s upbeat quarterly performance. The stock appreciation is also attributable to the rising oil prices following successful data from two COVID-19 vaccine studies.

Targa Resources reported third-quarter 2020 adjusted net income per share of 16 cents, beating the Zacks Consensus Estimate of 9 cents. Moreover, the bottom line came against the year-ago loss of 34 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 $349.6 million a year earlier to $419.1 million in the third quarter of 2020.

Moreover, total revenues of $2.12 billion were 11.1% higher than the year-ago quarter and also outpaced the Zacks Consensus Estimate of $1.9 billion.

Operational Performance

The Gathering and Processing segment recorded an operating margin of $261 million during the quarter, up 5.9% from $246.5 million achieved in the year-ago period. Permian Basin volumes increased 19.9% year over year to 2,569.6 million cubic feet per day.

In the Logistics and Transportation (or the Downstream) segment, the company reported operating margin of $280.4 million, up 22.5% year over year. Targa Resources saw fractionation volumes rise from 508.8 thousand barrels per day to 589.5, reflecting a 15.9% increase year over year. Moreover, export volumes expanded 29% year over year.

DCF, Capex & Balance Sheet

Third-quarter 2020 distributable cash flow (DCF) was $294.7 million, 28.2% higher than $229.9 million in the year-ago period. Targa Resources paid out a dividend of 10 cents per share.

As of Sep 30, 2020, the company had $275 million in cash and cash equivalents and $7.65 billion in long-term debt. Debt-to-capitalization was 55.2%.

Targa Resources, Inc. Price, Consensus and EPS Surprise

Targa Resources, Inc. Price, Consensus and EPS Surprise

Targa Resources, Inc. price-consensus-eps-surprise-chart | Targa Resources, Inc. Quote

Guidance

Targa Resources projects its growth capital spending guidance of approximately $700 million for 2020 and full-year maintenance capex of nearly $110 million.

With the upstream players starting to restore shut-in volumes in response to higher oil prices, Targa Resources foresees full-year adjusted EBITDA to be at or around the higher end of the prior guided range $1.5-$1.625 billion.

Zacks Rank & Key Picks

Targa Resources currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are CNOOC Limited (CEO - Free Report) , Antero Resources Corporation (AR - Free Report) and Noble Corporation (NE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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