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Targa Stock Up 44% in the Past Year: Is it Time to Buy or Hold?
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Key Takeaways
TRGP stock rose 43.9% in a year, beating the Oil Refining and Marketing sub-industry's 28% growth.
Record Q1 EBITDA of $1.18B, up 22% YoY, was driven by higher Permian volumes and fee-based contracts.
TRGP is expanding LPG exports, targeting 19M barrels/month capacity at Galena Park by Q3 2027.
Targa Resources Corp. (TRGP - Free Report) has seen its shares climb an impressive 43.9% over the past year, far outpacing the broader Oils-Energy sector, which rose just 7.2%. Within the Oil Refining & Marketing sub-industry, up 28% during the same period, TRGP still stands out as a top performer. In comparison, Western Midstream Partners (WES - Free Report) gained 11.6%, Sunoco (SUN - Free Report) rose 3.4% and NGL Energy Partners (NGL - Free Report) fell 21.1%. With such a strong track record over the last year, investors are now considering whether this is the right time to buy or if it is wiser to wait for a better opportunity.
1-Year Price Performance Comparison
Image Source: Zacks Investment Research
Targa Resources, headquartered in Houston, TX, plays a significant role in the energy infrastructure industry. The company focuses on various natural gas operations, including collection, processing, compression, treatment and distribution. TRGP’s operations are divided into two primary segments: Gathering and Processing, and Logistics and Transportation. The company makes revenues by charging fees for services such as moving, processing and storing natural gas, NGLs and crude oil.
So, what is fueling Targa’s impressive growth? Let us explore the core factors contributing to its strong performance and consider whether this growth trend is sustainable.
TRGP's Strategic Advantages
Strong Financial Performance and Record EBITDA: TRGP reported a record adjusted EBITDA of $1.18 billion in first-quarter 2025, a 22% increase year over year, driven by higher Permian volumes and improved marketing margins. The company reaffirmed its full-year 2025 adjusted EBITDA guidance of $4.65-$4.85 billion, signaling confidence in sustained growth. This robust financial performance underscores Targa's ability to capitalize on market opportunities and operational efficiency, making it an attractive investment.
The growth is supported by fee-based contracts, which provide stability even in volatile commodity price environments. Competitors like Western Midstream Partners and NGL Energy Partners also benefit from similar contract structures, but Targa’s scale offers a significant edge.
Strategic Position in the Permian Basin: Targa has a dominant footprint in the Permian Basin, the most prolific oil and gas region in the United States, with natural gas inlet volumes up 11% year over year. The company’s integrated infrastructure, including processing plants and pipelines, ensures flow assurance and captures value across the midstream chain. New projects like Pembrook II (third-quarter 2025) and Bull Moose II (first-quarter 2026) will further enhance capacity.
Targa’s exposure to high-quality producers with multi-year drilling programs provides resilience against short-term market fluctuations. Peer operators such as Sunoco and Western Midstream Partners are also investing in the Permian, but Targa’s diversified project pipeline distinguishes its long-term growth strategy.
Growing LPG Export Business: Targa’s LPG export volumes averaged 13.4 million barrels per month in first-quarter 2025, with strong global demand for U.S. propane and butane. The company is expanding its Galena Park terminal, increasing capacity to 19 million barrels per month by third-quarter 2027. Long-term contracts and cost-advantaged U.S. supply position Targa to benefit from rising international demand, particularly in Asia. Despite trade tensions, management remains confident in the growth trajectory of the business.
Sunoco, which is more retail and downstream-focused, does not directly compete in this segment, offering investors a unique exposure through Targa. In contrast, NGL Energy Partners maintains a smaller export footprint.
Shareholder-Friendly Capital Allocation: Targa repurchased $214 million in shares through April 2025 and increased its quarterly dividend by 33% to $1 per share ($4 annualized). The company’s disciplined capital return strategy, combined with a strong balance sheet (3.6x leverage ratio), highlights its commitment to rewarding shareholders. Opportunistic buybacks during market dislocations (e.g., April 2025 purchases at $167.28 per share) demonstrate prudent capital deployment.
Hedging Program Mitigates Commodity Risk: Targa has hedged more than 90% of its exposed volumes through 2026, reducing earnings volatility from fluctuating natural gas and NGL prices. This strategy protects cash flows, ensuring stable dividends and growth investments even in low-price environments. The company’s fee-based contracts and floor protections further insulate it from commodity downturns, providing predictable revenue streams. This approach compares favorably with Sunoco, which remains more exposed to fuel price cycles.
Expansion Projects Driving Growth: Targa is executing $2.6-$2.8 billion in growth capex for 2025, focusing on high-return projects like fractionation trains (Trains 11 & 12) and the Delaware Express pipeline. These expansions will support volume growth and enhance system integration. Management’s ability to accelerate project timelines (e.g., Pembrook II moving to third-quarter 2025) reflects operational efficiency and strong execution. While NGL Energy Partners has smaller-scale investments in logistics and storage, Targa’s growth outlook remains more aggressive and diversified.
Risks and Headwinds Facing Targa
Macroeconomic and Trade Risks: Global trade tensions, particularly U.S.-China tariffs on LPG, pose risks to Targa’s export business. While ethane was exempted, LPG remains subject to tariffs, potentially redirecting cargoes and squeezing margins. Management acknowledged "low-single-digit" cost impacts from tariffs, but prolonged disputes could dampen growth.
High Capital Expenditures and Debt Levels: Targa’s aggressive growth strategy requires significant capex ($2.6-$2.8 billion in 2025), funded partly by debt. Total consolidated debt was $16.2 billion as of first-quarter 2025, with interest expense of $197 million. While leverage (3.6x) is within target, rising rates or project delays could strain cash flows and limit financial flexibility.
Permian Volume Growth Uncertainty: Targa’s outlook assumes robust Permian production growth, but prolonged sub-$50 WTI oil prices could lead producers to curtail drilling. While major customers have multi-year programs, smaller operators may cut activity, slowing volume growth. The company noted a 1% sequential decline in first-quarter 2025 Permian volumes due to weather, highlighting operational vulnerabilities.Western Midstream Partners, which also operates in the Permian, faces similar uncertainties, though it benefits from a higher percentage of fixed-fee revenues.
Competition in Midstream Sector: Targa faces intense competition from peers like Enterprise Products and Energy Transfer in fractionation, pipelines and exports. New LPG export projects (e.g., Enterprise’s expansions) could pressure terminal fees. The company’s reliance on organic growth (vs. M&A) may limit market share gains in a crowded sector. NGL Energy Partners is actively pursuing consolidation opportunities, which could increase pressure on Targa’s organic strategy.
Regulatory and Environmental Risks: Midstream operators face increasing scrutiny over emissions and pipeline permits. Targa’s growth projects (e.g., Traverse Pipeline) could encounter delays from regulatory hurdles. Stricter environmental policies or carbon taxes may raise compliance costs, impacting profitability. Unlike Sunoco, which operates under different regulatory frameworks due to its retail operations, Targa’s infrastructure-intensive model may face more environmental opposition.
Final Thoughts for TRGP Stock
Targa’s strong financial performance, strategic footprint in the Permian Basin and growing LPG export business position it well for continued growth, supported by solid hedging and shareholder-friendly capital returns. The company’s significant investment in expansion projects further drives future capacity and integration benefits. However, high capital expenditures and debt, trade tensions impacting export margins and potential slowdowns in Permian production create risks. Additionally, regulatory hurdles and fierce competition in the midstream sector may challenge profitability and growth timelines.
Image: Shutterstock
Targa Stock Up 44% in the Past Year: Is it Time to Buy or Hold?
Key Takeaways
Targa Resources Corp. (TRGP - Free Report) has seen its shares climb an impressive 43.9% over the past year, far outpacing the broader Oils-Energy sector, which rose just 7.2%. Within the Oil Refining & Marketing sub-industry, up 28% during the same period, TRGP still stands out as a top performer. In comparison, Western Midstream Partners (WES - Free Report) gained 11.6%, Sunoco (SUN - Free Report) rose 3.4% and NGL Energy Partners (NGL - Free Report) fell 21.1%. With such a strong track record over the last year, investors are now considering whether this is the right time to buy or if it is wiser to wait for a better opportunity.
1-Year Price Performance Comparison
Image Source: Zacks Investment Research
Targa Resources, headquartered in Houston, TX, plays a significant role in the energy infrastructure industry. The company focuses on various natural gas operations, including collection, processing, compression, treatment and distribution. TRGP’s operations are divided into two primary segments: Gathering and Processing, and Logistics and Transportation. The company makes revenues by charging fees for services such as moving, processing and storing natural gas, NGLs and crude oil.
So, what is fueling Targa’s impressive growth? Let us explore the core factors contributing to its strong performance and consider whether this growth trend is sustainable.
TRGP's Strategic Advantages
Strong Financial Performance and Record EBITDA: TRGP reported a record adjusted EBITDA of $1.18 billion in first-quarter 2025, a 22% increase year over year, driven by higher Permian volumes and improved marketing margins. The company reaffirmed its full-year 2025 adjusted EBITDA guidance of $4.65-$4.85 billion, signaling confidence in sustained growth. This robust financial performance underscores Targa's ability to capitalize on market opportunities and operational efficiency, making it an attractive investment.
The growth is supported by fee-based contracts, which provide stability even in volatile commodity price environments. Competitors like Western Midstream Partners and NGL Energy Partners also benefit from similar contract structures, but Targa’s scale offers a significant edge.
Strategic Position in the Permian Basin: Targa has a dominant footprint in the Permian Basin, the most prolific oil and gas region in the United States, with natural gas inlet volumes up 11% year over year. The company’s integrated infrastructure, including processing plants and pipelines, ensures flow assurance and captures value across the midstream chain. New projects like Pembrook II (third-quarter 2025) and Bull Moose II (first-quarter 2026) will further enhance capacity.
Targa’s exposure to high-quality producers with multi-year drilling programs provides resilience against short-term market fluctuations. Peer operators such as Sunoco and Western Midstream Partners are also investing in the Permian, but Targa’s diversified project pipeline distinguishes its long-term growth strategy.
Growing LPG Export Business: Targa’s LPG export volumes averaged 13.4 million barrels per month in first-quarter 2025, with strong global demand for U.S. propane and butane. The company is expanding its Galena Park terminal, increasing capacity to 19 million barrels per month by third-quarter 2027. Long-term contracts and cost-advantaged U.S. supply position Targa to benefit from rising international demand, particularly in Asia. Despite trade tensions, management remains confident in the growth trajectory of the business.
Sunoco, which is more retail and downstream-focused, does not directly compete in this segment, offering investors a unique exposure through Targa. In contrast, NGL Energy Partners maintains a smaller export footprint.
Shareholder-Friendly Capital Allocation: Targa repurchased $214 million in shares through April 2025 and increased its quarterly dividend by 33% to $1 per share ($4 annualized). The company’s disciplined capital return strategy, combined with a strong balance sheet (3.6x leverage ratio), highlights its commitment to rewarding shareholders. Opportunistic buybacks during market dislocations (e.g., April 2025 purchases at $167.28 per share) demonstrate prudent capital deployment.
Hedging Program Mitigates Commodity Risk: Targa has hedged more than 90% of its exposed volumes through 2026, reducing earnings volatility from fluctuating natural gas and NGL prices. This strategy protects cash flows, ensuring stable dividends and growth investments even in low-price environments. The company’s fee-based contracts and floor protections further insulate it from commodity downturns, providing predictable revenue streams. This approach compares favorably with Sunoco, which remains more exposed to fuel price cycles.
Expansion Projects Driving Growth: Targa is executing $2.6-$2.8 billion in growth capex for 2025, focusing on high-return projects like fractionation trains (Trains 11 & 12) and the Delaware Express pipeline. These expansions will support volume growth and enhance system integration. Management’s ability to accelerate project timelines (e.g., Pembrook II moving to third-quarter 2025) reflects operational efficiency and strong execution. While NGL Energy Partners has smaller-scale investments in logistics and storage, Targa’s growth outlook remains more aggressive and diversified.
Risks and Headwinds Facing Targa
Macroeconomic and Trade Risks: Global trade tensions, particularly U.S.-China tariffs on LPG, pose risks to Targa’s export business. While ethane was exempted, LPG remains subject to tariffs, potentially redirecting cargoes and squeezing margins. Management acknowledged "low-single-digit" cost impacts from tariffs, but prolonged disputes could dampen growth.
High Capital Expenditures and Debt Levels: Targa’s aggressive growth strategy requires significant capex ($2.6-$2.8 billion in 2025), funded partly by debt. Total consolidated debt was $16.2 billion as of first-quarter 2025, with interest expense of $197 million. While leverage (3.6x) is within target, rising rates or project delays could strain cash flows and limit financial flexibility.
Permian Volume Growth Uncertainty: Targa’s outlook assumes robust Permian production growth, but prolonged sub-$50 WTI oil prices could lead producers to curtail drilling. While major customers have multi-year programs, smaller operators may cut activity, slowing volume growth. The company noted a 1% sequential decline in first-quarter 2025 Permian volumes due to weather, highlighting operational vulnerabilities.Western Midstream Partners, which also operates in the Permian, faces similar uncertainties, though it benefits from a higher percentage of fixed-fee revenues.
Competition in Midstream Sector: Targa faces intense competition from peers like Enterprise Products and Energy Transfer in fractionation, pipelines and exports. New LPG export projects (e.g., Enterprise’s expansions) could pressure terminal fees. The company’s reliance on organic growth (vs. M&A) may limit market share gains in a crowded sector. NGL Energy Partners is actively pursuing consolidation opportunities, which could increase pressure on Targa’s organic strategy.
Regulatory and Environmental Risks: Midstream operators face increasing scrutiny over emissions and pipeline permits. Targa’s growth projects (e.g., Traverse Pipeline) could encounter delays from regulatory hurdles. Stricter environmental policies or carbon taxes may raise compliance costs, impacting profitability. Unlike Sunoco, which operates under different regulatory frameworks due to its retail operations, Targa’s infrastructure-intensive model may face more environmental opposition.
Final Thoughts for TRGP Stock
Targa’s strong financial performance, strategic footprint in the Permian Basin and growing LPG export business position it well for continued growth, supported by solid hedging and shareholder-friendly capital returns. The company’s significant investment in expansion projects further drives future capacity and integration benefits. However, high capital expenditures and debt, trade tensions impacting export margins and potential slowdowns in Permian production create risks. Additionally, regulatory hurdles and fierce competition in the midstream sector may challenge profitability and growth timelines.
Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.