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Targa Resources’ (TRGP - Free Report) stock has risen 4.2% since its third-quarter results were announced on Nov 3.
The positive response came despite the midstream energy infrastructure provider’s third-quarter earnings and sales underperforming the consensus mark. This could be attributed to record volumes in the Permian, NGL transportation and fractionation volumes and the integration of TRGP’s Delaware Basin acquisition, along with successfully bringing in two plants in the Permian Basin safely.
What Did Targa Resources’ Earnings Unveil?
Targa Resources reported a third-quarter 2022 net income of 84 cents per share, which lagged the Zacks Consensus Estimate of $1.23 but increased from the year-ago profit of 66 cents. The underperformance could be attributed to lower-than-expected sales in the reported quarter and higher expenses.
The company’s adjusted EBITDA climbed from $505.9 million a year earlier to $768.6 million in the third quarter of 2022.
The third-quarter 2022 distributable cash flow was $594.9 million, about 55% higher than $383.9 million in the year-ago period. Targa Resources paid out a dividend of 35 cents per share, while adjusted free cash flow fell 2.1% from the third quarter of 2021 to $290.8 million. TRGP repurchased shares worth $72.9 million during the July-September period.
Moreover, total revenues of $5.36 billion were 20% higher than the year-ago quarter. However, revenues underperformed the Zacks Consensus Estimate of $6.96 billion.
Targa Resources, Inc. Price, Consensus and EPS Surprise
Gathering and Processing: The segment recorded an operating margin of $564.6 million during the quarter, up 56.2% from the $361.4 million achieved in the year-ago period. The jump primarily reflects higher Permian Basin volumes that increased 41.7% year over year to average 4,092 million cubic feet per day.
Logistics and Transportation: This unit mainly reflects Targa Resources’ downstream operations. The segment’s operating margin of $340.2 million was up 21.2% year over year.
TRGP saw fractionation volumes rise from 662 thousand barrels per day to 742.1 thousand barrels per day, which is a 12.1% increase year over year. Moreover, NGL pipeline transportation volumes were up significantly too by 20% year over year, while NGL sales improved 4.1%.
Costs, Capex & Balance Sheet
Targa Resources reported product costs of $4.3 billion in the third quarter of 2022, rising 19.1% from the year-ago quarter.
In the reported quarter, TRGP spent $304.1 million on growth capital programs compared with $86.7 million in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $192.9 million and long-term debt of $11 billion, with a debt-to-capitalization of around 70%.
Guidance
Targa Resources maintained its full-year previous adjusted EBITDA estimate in the band of $2.85-$2.95 billion.
The company now anticipates 2022 growth capital expenditures between $1.1 billion and $1.2 billion, with net maintenance capital spending reiterated at $150 million.
The Williams Companies, Inc. (WMB - Free Report) reported third-quarter 2022 adjusted earnings per share of 48 cents, beating the Zacks Consensus Estimate of 44 cents. The outperformance resulted from higher-than-expected contributions from a couple of segments.
WMB maintained its 2022 adjusted EBITDA guidance in the band of $6.1-$6.4 billion, with growth capital spending in the range of $1.25-$1.35 billion. Further, Williams expects a leverage ratio midpoint of 3.6, lower than the original guidance of 3.8.
MPLX LP (MPLX - Free Report) reported third-quarter earnings of 96 cents per unit, beating the Zacks Consensus Estimate of 81 cents. The strong quarterly results were supported by higher contributions from logistics and storage operations and the gathering and processing business.
MPLX’s distribution per unit was 77.5 cents for the third quarter, highlighting a 10% hike from the prior distribution of 70.5 cents. The distribution will be paid out on Nov 22, 2022, to common unitholders of record as of Nov 15, 2022.
Oceaneering (OII - Free Report) reported a third-quarter 2022 adjusted profit of 23 cents per share, beating the Zacks Consensus Estimate of a profit of 13 cents. The outperformance was largely due to robust results in certain segments.
For 2022, Oceaneering projects consolidated EBITDA in the band of $215-$240 million and continued significant free cash flow generation in the range of $25-$75 million.
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Targa (TRGP) Stock Rises 4% Despite Q3 Earnings & Sales Lag
Targa Resources’ (TRGP - Free Report) stock has risen 4.2% since its third-quarter results were announced on Nov 3.
The positive response came despite the midstream energy infrastructure provider’s third-quarter earnings and sales underperforming the consensus mark. This could be attributed to record volumes in the Permian, NGL transportation and fractionation volumes and the integration of TRGP’s Delaware Basin acquisition, along with successfully bringing in two plants in the Permian Basin safely.
What Did Targa Resources’ Earnings Unveil?
Targa Resources reported a third-quarter 2022 net income of 84 cents per share, which lagged the Zacks Consensus Estimate of $1.23 but increased from the year-ago profit of 66 cents. The underperformance could be attributed to lower-than-expected sales in the reported quarter and higher expenses.
The company’s adjusted EBITDA climbed from $505.9 million a year earlier to $768.6 million in the third quarter of 2022.
The third-quarter 2022 distributable cash flow was $594.9 million, about 55% higher than $383.9 million in the year-ago period. Targa Resources paid out a dividend of 35 cents per share, while adjusted free cash flow fell 2.1% from the third quarter of 2021 to $290.8 million. TRGP repurchased shares worth $72.9 million during the July-September period.
Moreover, total revenues of $5.36 billion were 20% higher than the year-ago quarter. However, revenues underperformed the Zacks Consensus Estimate of $6.96 billion.
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 $564.6 million during the quarter, up 56.2% from the $361.4 million achieved in the year-ago period. The jump primarily reflects higher Permian Basin volumes that increased 41.7% year over year to average 4,092 million cubic feet per day.
Logistics and Transportation: This unit mainly reflects Targa Resources’ downstream operations. The segment’s operating margin of $340.2 million was up 21.2% year over year.
TRGP saw fractionation volumes rise from 662 thousand barrels per day to 742.1 thousand barrels per day, which is a 12.1% increase year over year. Moreover, NGL pipeline transportation volumes were up significantly too by 20% year over year, while NGL sales improved 4.1%.
Costs, Capex & Balance Sheet
Targa Resources reported product costs of $4.3 billion in the third quarter of 2022, rising 19.1% from the year-ago quarter.
In the reported quarter, TRGP spent $304.1 million on growth capital programs compared with $86.7 million in the year-ago period. As of Sep 30, the company had cash and cash equivalents of $192.9 million and long-term debt of $11 billion, with a debt-to-capitalization of around 70%.
Guidance
Targa Resources maintained its full-year previous adjusted EBITDA estimate in the band of $2.85-$2.95 billion.
The company now anticipates 2022 growth capital expenditures between $1.1 billion and $1.2 billion, with net maintenance capital spending reiterated at $150 million.
Zacks Rank & Stocks to Consider
Targa Resources currently has a Zacks Rank #3 (Hold). Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Williams Companies, Inc. (WMB - Free Report) reported third-quarter 2022 adjusted earnings per share of 48 cents, beating the Zacks Consensus Estimate of 44 cents. The outperformance resulted from higher-than-expected contributions from a couple of segments.
WMB maintained its 2022 adjusted EBITDA guidance in the band of $6.1-$6.4 billion, with growth capital spending in the range of $1.25-$1.35 billion. Further, Williams expects a leverage ratio midpoint of 3.6, lower than the original guidance of 3.8.
MPLX LP (MPLX - Free Report) reported third-quarter earnings of 96 cents per unit, beating the Zacks Consensus Estimate of 81 cents. The strong quarterly results were supported by higher contributions from logistics and storage operations and the gathering and processing business.
MPLX’s distribution per unit was 77.5 cents for the third quarter, highlighting a 10% hike from the prior distribution of 70.5 cents. The distribution will be paid out on Nov 22, 2022, to common unitholders of record as of Nov 15, 2022.
Oceaneering (OII - Free Report) reported a third-quarter 2022 adjusted profit of 23 cents per share, beating the Zacks Consensus Estimate of a profit of 13 cents. The outperformance was largely due to robust results in certain segments.
For 2022, Oceaneering projects consolidated EBITDA in the band of $215-$240 million and continued significant free cash flow generation in the range of $25-$75 million.