Yahoo Finance Why Is Targa Resources, Inc. (TRGP) Down 12.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Targa Resources, Inc. (TRGP). Shares have lost about 12.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Targa Resources, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Targa Resources Q4 Earnings Beat Estimates, Sales Miss
Targa Resources reported fourth-quarter 2022 net income of $1.38 per share, beating the Zacks Consensus Estimate of $1.29. It surged from the year-ago profit of 51 cents per share. The outperformance could be attributed to strong volumes across its systems and low product costs in the reported quarter.
The company’s adjusted EBITDA for fourth-quarter 2022 was $840.4 million, up from $570.6 million in the prior-year quarter.
The fourth-quarter 2022 distributable cash flow was $655.5 million, about 55% higher than $420.7 million in the year-ago period.
Targa Resources paid out a dividend of 35 cents per share and repurchased shares worth $28.0 million during the October-December period. Adjusted free cash flow was $103.1 million, down 57.1% from the fourth quarter of 2021.
Total revenues were $4.6 billion, down 16.3% from the year-ago quarter’s tally. The figure also missed the Zacks Consensus Estimate of $5.4 billion owing to lower commodity sales.
Operational Performance
Gathering and Processing: The segment recorded an operating margin of $544.0 million during the quarter, up 40.5% from the $387.1 million in the year-ago period.
The jump primarily reflects higher Permian Basin volumes that increased 57.4% year over year to an average 4,747.3 million cubic feet per day.
Logistics and Transportation: This unit mainly reflects Targa Resources’ downstream operations. The segment’s operating margin of $441.6 million was up 28.5% year over year.
The rise in adjusted operating margin within the segment was due to various factors, including increased marketing margin, greater volumes of pipeline transportation and fractionation, and higher export volumes of LPG. The higher marketing margin was a result of increased optimization opportunities.
TRGP’s fractionation volumes increased from 611.6 thousand barrels per day to 744.4, indicating a 21.7% increase year over year.
NGL pipeline transportation volumes were up 16% year over year. NGL sales also improved 3%.
Costs, Capex & Balance Sheet
Targa Resources reported product costs of $3.3 billion in the fourth quarter of 2022, down 27.3% from the year-ago quarter.
In the reported quarter, TRGP spent $552.4 million on growth capital programs compared with $179.9 million in the year-ago period.
As of Dec 31, 2022, the company had cash and cash equivalents of $219.0 million and long-term debt of $10.7 billion, with a debt-to-capitalization of around 68%.
Guidance
Targa Resources expects adjusted EBITDA estimate for 2023 in the $3.5-$3.7 billion range.
The company now anticipates 2023 growth capital expenditures between $1.8 billion and $1.9 billion, with net maintenance capital spending at $175 million.
For 2023, Targa expects prices for natural gas, natural gas liquids, and crude oil to be $2.25/MMbtu, 70 cents/gallon, and $75/barrel, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.54% due to these changes.
VGM Scores
Currently, Targa Resources, Inc. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second 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 indicates a downward shift. 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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Targa Resources, Inc. (TRGP) : Free Stock Analysis Report
