Targa Resources Corp. TRGP reported third-quarter 2024 earnings of $1.75 per share, which beat the Zacks Consensus Estimate of $1.58. The bottom line also topped the year-ago quarter’s 97 cents. The outperformance could be attributed to strong Permian Basin volumes, robust NGL sales and lower product costs in the reported quarter.
Revenues totaled $3.9 billion, slipping 1.1% year over year. The top line also missed the Zacks Consensus Estimate of $4.2 billion. The weak quarterly revenues were due to lower natural gas prices and the unfavorable impact of hedges.
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The company’s adjusted EBITDA for the third quarter totaled $1.1 billion, up from $840.2 million in the prior-year period.
Targa Resources, Inc. Price, Consensus and EPS Surprise
Targa Resources, Inc. price-consensus-eps-surprise-chart | Targa Resources, Inc. Quote
A Closer Look at TRGP’s Q3 Results
On Oct. 10, Targa declared a quarterly cash dividend of 75 cents per common share, or $3, on an annualized basis for the third quarter of 2024. Total cash dividends of approximately $164 million will be distributed on Nov. 15 to its shareholders of record as of the close of business on Oct. 31.
Targa repurchased more than 1.1 million shares of its common stock in this quarter, spending approximately $167.9 million at an average price of $146.02 per share. As of Sept. 30, the company had $1.1 billion remaining in its share repurchase program.
In the third quarter, the company recorded significant volumes in the Permian Basin, indicating robust activity levels across the Permian Midland systems. Furthermore, the new 275 million cubic feet per day (MMcf/d) Greenwood II plant in the Permian Midland commenced operations and achieved high utilization in this period. The company announced plans to build two new gas processing plants in the Permian Basin, each capable of processing 275 MMcf of gas per day.
TRGP’s Segmental Performance
Gathering and Processing: The segment recorded an operating margin of $584.3 million, up 16% from $505 million recorded in the year-ago period, though it missed the Zacks Consensus Estimate of $591 million.
The year-over-year outperformance reflects higher Permian Basin volumes that increased 18% year over year to an average of 5,982.2 MMcf/d and beat the consensus mark of 5,955 MMcf/d.
Logistics and Transportation: This unit reflects the company’s downstream operations. Its operating margin of $619.2 million increased 35% year over year and topped the Zacks Consensus Estimate of $568 million. The rise can be attributed to higher pipeline transportation and fractionation, and LPG export margins. Increased NGL supplies from Targa's Permian G&P operations and the start-up of Targa’s Daytona NGL Pipeline also played their part.
TRGP’s fractionation volumes totaled 953.8 thousand barrels per day, up 20% from 793.4 thousand barrels per day recorded a year ago. The Zacks Consensus Estimate for the same was pegged at 994 thousand barrels per day. NGL pipeline transportation volumes rose 26% year over year, export volumes increased 16% and NGL sales saw a 16% improvement in the same period.
Costs, Capex & Balance Sheet
Targa incurred product costs of $2.4 billion in the third quarter, down 12% from the year-ago quarter’s actual. At the same time, the company reported operating expenses of $301 million, up 8% from the year-ago quarter’s level of $277.7 million.
The company spent $698.4 million on growth capital programs compared with $593.6 million in the year-ago period.
As of Sept. 30, TRGP had cash and cash equivalents of $127.2 million and long-term debt of $13.6 billion, with a debt-to-capitalization of around 76.2%.
Guidance Provided by TRGP
2024 Guidance: Targa Resources anticipates a strong year with adjusted EBITDA expected to exceed the top end of its guidance between $3.95 billion and $4.05 billion. This growth is fueled by the acceleration of spending on infrastructure to handle additional volume growth. Targa expects to complete the reactivation of Gulf Coast Fractionators in Mont Belvieu in November 2024.
2025 Guidance: The company is in the middle of its planning process and plans to detail its full-year 2025 operational and financial outlook in February 2025.
For the first quarter of 2025, the company intends to increase its common dividend to $1.00 per common share, subject to approval. If approved, the recommended dividend would be effective for the first quarter of 2025 and payable in May 2025.
2026 Guidance: The East Pembrook plant is expected to be completed ahead of its schedule in the second quarter of 2026. The company is expected to commence operations in its two new 275 MMcf/d natural gas processing plants in Permian Delaware and Permian Midland in the second and third quarter of 2026, respectively.
TRGP’s Zacks Rank and Key Midstream Service Players
TRGP currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other Midstream Service players that also reported their earnings are MPLX LP MPLX, Cheniere Energy, Inc. LNG and TC Energy Corporation TRP.
MPLX LP (MPLX), the Findlay, OH-based midstream energy services company, announced third-quarter 2024 earnings of $1.01 per unit, which missed the Zacks Consensus Estimate of $1.06. The weak Q3 earnings were due to higher depreciation and amortization costs and increased general and administrative expenses. MPLX’s bottom line, however, increased from the year-ago figure of 89 cents due to higher throughput and increased gathered and processed volumes.
Houston, TX-based Cheniere Energy, Inc. (LNG), engaged in businesses related to liquefied natural gas, reported a third-quarter 2024 adjusted profit of $3.93 per share, topping the Zacks Consensus Estimate of $1.79: it also outperformed the year-ago quarter profit of $2.37. The strong quarterly earnings were driven by a year-over-year decrease in costs and expenses.
As of Sept. 30, 2024, it had cash and cash equivalents of $2.7 billion. The company had a long-term debt of $22.5 billion at the end of the reported quarter, marking a debt-to-capitalization of 70.7%.
Meanwhile, natural gas transmission company TC Energy Corporation (TRP) reported third-quarter adjusted earnings per share of 76 cents, beating the Zacks Consensus Estimate of 70 cents. The strong bottom line was achieved due to rising demand for natural gas and reliable power generation.
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