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Targa Resources, Inc. (TRGP) Up 9.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Targa Resources, Inc. (TRGP - Free Report) . Shares have added about 9.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Targa Resources, Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Targa Resources Reports Loss in Q4

Targa Resources reported fourth-quarter 2020 adjusted loss per share of 4 cents, compared to the Zacks Consensus Estimate of a profit of 23 cents and the year-ago earnings of 14 cents. The underperformance reflects increased operating expenses, partly offset by strong volumes across the company’s Permian gathering and processing systems and a robust operational performance across its Logistics and Transportation systems.

The company’s adjusted EBITDA descended from $465.2 million a year earlier to $438.1 million in the fourth quarter of 2020.

Meanwhile, total revenues of $2.57 billion were 4% higher than the year-ago quarter and also outpaced the Zacks Consensus Estimate of $2.29 billion.

Operational Performance

The Gathering and Processing segment recorded an operating margin of $263.9 million during the quarter, down 8.9% from $289.7 million achieved in the year-ago period. However, Permian Basin volumes increased 9.9% year over year to 2,595.2 million cubic feet per day.

In the Logistics and Transportation (or the Downstream) segment, the company reported an operating margin of $322 million, up 6.6% year over year. Targa Resources saw fractionation volumes rise from 596.7 thousand barrels per day to 632.3, reflecting a 6% increase year over year. Moreover, export volumes expanded 38.3% year over year.

DCF, Capex & Balance Sheet

Fourth-quarter 2020 distributable cash flow (DCF) was $293.9 million, 10.3% lower than $327.8 million in the year-ago period. Targa Resources paid out a dividend of 10 cents per share.

As of Dec 31, 2020, the company had $242.8 million in cash and cash equivalents and $7.39 billion in long-term debt. Debt-to-capitalization was 55.6%.

Guidance

For 2021, Targa Resources projects its growth capital spending guidance in the $350-$450 million range and full-year maintenance capex of nearly $130 million.

With the upstream players starting to restore shut-in volumes in response to higher oil prices, Targa Resources foresees 2021 adjusted EBITDA in the range $1.675-$1.77 billion with the midpoint indicating a 5% rise from the 2020 levels.

Targa Resources anticipates 2021 Permian natural gas inlet volumes to increase 5-10% from the 2020 levels. Further, it expects 2021 average total Field Gathering and Processing natural gas inlet volumes to be flat with the 2020 average.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Targa Resources, Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Targa Resources, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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