On Tuesday, Barclays (LON:BARC) adjusted its outlook on Targa Resources Corp (NYSE:TRGP), increasing the price target to $122.00 from the previous $116.00. The firm maintained its Overweight rating on the stock. The revision comes ahead of the company's first-quarter earnings report, with an anticipated adjusted EBITDA of $945 million, slightly above the consensus estimate of $937 million.
Despite a forecasted decline in earnings from the fourth quarter of 2023 due to weather-related challenges, Barclays anticipates a recovery in the second half of 2024. This optimism is based on the expected completion of Targa Resources' capacity expansions. The analyst predicts that the Gathering and Processing (G&P) segment will face quarter-over-quarter headwinds but projects a volume increase in the latter half of the year as the Roadrunner II and Greenwood II facilities commence operations.
In the G&P segment, the first-quarter adjusted EBIT is forecasted at $525 million, which is slightly below the Bloomberg consensus of $530 million. The segment's performance was bolstered by the early completion of the Wildcat II facility, with a capacity of 275 million cubic feet per day, in the fourth quarter of 2023, followed by a ramp-up in the first quarter of 2024. However, weather-related volume declines in January were noted, with a recovery in February and a return to levels seen in the previous quarter by March.
Barclays also highlighted the strategic positioning of Targa Resources, with approximately 90% of the company's G&P volumes secured under fee-based agreements or contracts with minimum fee commitments. This arrangement minimizes the company's exposure to the adverse Waha basis, providing a financial safeguard against market volatility. The analyst expects an approximate 9% growth in Permian inlet volumes year-over-year for 2024.
InvestingPro Insights
As Targa Resources Corp (NYSE:TRGP) approaches its earnings report, current InvestingPro data highlights a market capitalization of $25.39 billion, with a Price/Earnings (P/E) ratio of 30.84, reflecting a high earnings multiple in comparison to the industry average. The company's Price/Book ratio also stands at a substantial 9.23, indicating a premium valuation by the market as of the last twelve months ending Q4 2023.
From an operational standpoint, Targa has demonstrated a robust gross profit margin of 33.52%, with an operating income margin of 16.35% in the same period. While revenue has seen a decline of 23.27% over the last year, the company's dividend yield is currently at 1.72%, and it has sustained dividend payments for 14 consecutive years, showcasing a commitment to shareholder returns.
InvestingPro Tips suggest that TRGP's stock price movements have been quite volatile, a factor that traders should consider, especially as the stock is trading near its 52-week high. Furthermore, the company has been flagged as trading at a high Price/Book multiple. For investors seeking additional insights, there are over 13 additional InvestingPro Tips available, which could provide further guidance on TRGP's stock performance. To access these tips and enhance your investment strategy, use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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