On Thursday, BofA Securities resumed coverage on shares of Targa Resources (NYSE: NYSE:TRGP), issuing a Buy rating and establishing a price target of $182.00. The firm highlighted Targa Resources' strong ties to the growth in the Permian Basin, noting that the company has historically outpaced the region's natural gas liquids (NGLs) growth by 2-3%.
The analyst pointed to the Permian Basin's expected 6%+ growth in NGL production, which suggests an 8% growth projection for Targa Resources leading into the years 2025 and 2026. This growth is anticipated to contribute approximately $399 million in annual EBITDA growth for the company. Additionally, a one-time improvement in commodity prices and shifts from third-party transportation and fractionation (T&F) to Targa's own operations are expected to bolster the company's financials by around $200 million.
Targa Resources is positioned to benefit from the robust activity in the Permian Basin, which is one of the most prolific oil and natural gas producing areas in the United States. The company's strategic focus on this region appears to be a key factor in BofA Securities' optimistic outlook.
The new price target of $182.00 represents a significant endorsement of Targa Resources' potential in the coming years. It reflects the firm's confidence in the company's ability to capitalize on the industry's dynamics, particularly in the NGL segment, which is a vital component of the energy market.
Investors and market watchers will likely monitor Targa Resources' performance closely, as it aligns its operations with the projected growth in the Permian Basin. The company's success in leveraging the region's expansion could have a notable impact on its financial results in the forecasted period.
In other recent news, Targa Resources has declared a quarterly cash dividend of $0.75 per share for the third quarter of 2024. This announcement comes as the company prepares to report its third-quarter financial results for 2024. In addition, Targa Resources has made noteworthy financial strides, with Barclays upgrading its price target due to expected growth in the Gathering & Processing (G&P) segment. The company has also issued $1 billion in 5.5% Senior Notes due in 2035, with proceeds designated for various corporate purposes.
On the analyst front, Citi has maintained a Buy rating on Targa Resources, predicting a third-quarter EBITDA of $1.02 billion, slightly above the average estimate. This is based on the company's continued execution of its growth strategy, which includes a significant increase in Permian volumes. RBC Capital has also maintained an Outperform rating on Targa's stock, following the company's robust second-quarter results for 2024.
Targa Resources has extended its credit facility to August 2025, ensuring continued access to capital for its working capital requirements. The company also appointed Will Byers as the new Chief Financial Officer and announced its participation in the Blackcomb pipeline joint venture. These recent developments underline Targa Resources' commitment to enhancing its operations and financial health.
InvestingPro Insights
The positive outlook from BofA Securities aligns well with several key metrics and insights from InvestingPro. Targa Resources (NYSE: TRGP) has demonstrated strong financial performance, with a market capitalization of $35.63 billion and a robust revenue of $16.26 billion over the last twelve months as of Q2 2024. The company's profitability is evident, with an adjusted operating income of $2.41 billion during the same period.
InvestingPro Tips highlight that Targa Resources has raised its dividend for 3 consecutive years, reflecting confidence in its cash flow generation. This is particularly relevant given the projected growth in the Permian Basin, which could further support dividend sustainability. Additionally, the stock has shown a strong return over the last three months, with a price total return of 22.08%, indicating market optimism that aligns with BofA's bullish stance.
It's worth noting that TRGP is trading near its 52-week high, with the current price at 96.92% of its peak. This, combined with the InvestingPro Tip that the stock has seen a large price uptick over the last six months (46.66% total return), suggests that investors are already pricing in some of the growth expectations mentioned in the BofA report.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Targa Resources, providing a deeper understanding of the company's financial health and market position.
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