Targa Resources Corp. (NYSE: TRGP) has reported record financial results for the fourth quarter and full year 2023, demonstrating resilience in a lower commodity price environment. The company's net income attributable to Targa Resources Corp. for the fourth quarter of 2023 was $299.6 million, compared to $318.0 million for the same period in 2022. For the full year 2023, net income attributable to Targa Resources Corp. reached a record $1,345.9 million, up from $1,195.5 million in 2022.
CEO Joe Bob Perkins said, "Targa's record operational and financial results in 2023 despite a significantly lower commodity price environment demonstrates the resiliency of its diversified operations and growing fee-based midstream businesses."
Key financial highlights for 2023 include: - Record full year adjusted EBITDA of $3,530.0 million, marking a 22% increase over 2022. - Record full year Permian, NGL transportation, fractionation, and LPG export volumes. - Record full year common share repurchases of $373.7 million. - Exiting 2023 with approximately 90% of gathering and processing volumes fee or fee-floor based.
For the fourth quarter of 2023, Targa reported adjusted EBITDA of $959.9 million, representing a 14% sequential increase. The company's fourth quarter Permian, NGL transportation, fractionation, and LPG export volumes also set new records.
Looking ahead, Targa estimates 2024 adjusted EBITDA to be between $3.7 billion and $3.9 billion, an 8% increase over 2023. The company expects to benefit from meaningful growth across its Permian gathering and processing footprint, driving record volumes in various segments. Targa also plans to recommend an increase in its common dividend to $0.75 per common share for the first quarter of 2024, with expectations to further increase capital returned to shareholders.
Targa's positioning in 2025 anticipates a meaningful step down in net growth capital expenditures compared to 2023 and 2024, with a focus on completing key projects and generating adjusted free cash flow.
The company's full 8-K submission is available here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $9,351 | $8,671 | $8,260 | $16,950 | $20,930 | $16,376 |
| Operating Margins | 3% | 2% | -16% | 5% | 8% | 16% |
| Net Margins | 0% | -2% | -19% | 0% | 6% | 8% |
| Net Income (M) | $2 | -$209 | -$1,554 | $71 | $1,196 | $1,364 |
| Net Interest Expense (M) | -$186 | -$338 | -$391 | -$388 | -$446 | -$655 |
| Depreciation & Amort. (M) | $816 | $972 | $865 | $871 | $1,096 | $1,318 |
| Diluted Shares (M) | 224 | 232 | 232 | 229 | 231 | 225 |
| Earnings Per Share | -$0.53 | -$1.44 | -$7.26 | -$0.07 | $3.88 | $3.81 |
| EPS Growth | n/a | -171.7% | -404.17% | 99.04% | 5642.86% | -1.8% |
| Avg. Price | $39.96 | $34.85 | $19.69 | $40.47 | $65.49 | $93.205 |
| P/E Ratio | -75.4 | -24.2 | -2.71 | -578.14 | 16.58 | 41.24 |
| Free Cash Flow (M) | -$1,971 | -$1,488 | $793 | $1,798 | $1,046 | $607 |
| EV / EBITDA | 15.38 | 13.37 | -27.56 | 9.04 | 9.31 | 8.63 |
| Total Debt (M) | $7,690 | $7,810 | $7,744 | $6,584 | $11,536 | $12,318 |
| Net Debt / EBITDA | 7.08 | 6.42 | -17.1 | 3.7 | 4.01 | 3.15 |
| Current Ratio | 0.51 | 0.89 | 0.82 | 0.77 | 0.77 | 0.8 |
Targa Resources (TRGP) appears to be undervalued at its current price of $93.27 per share due to its strong growth potential. The company's revenues are rapidly growing at a rate of 12.7%, and its earnings per share have shown an impressive annualized growth rate of 42.0% over the last 6 years. Additionally, with a PEG ratio near 1, the shares are likely fairly valued in terms of growth potential.
On the flip side, Targa Resources has some concerning factors such as decreasing capital expenditures at a rate of -6.1% and lower-than-average operating margins that have averaged out at 3.0% over the last 6 years, significantly below the industry average of 10.55%. Despite this, the company's margins are showing promising growth at an average yearly rate of 45.0%.
From a value perspective, Targa Resources is trading above its fair value with a P/E ratio of 24.5 and a P/B ratio of 8.3. The company also has a high Net Debt / EBITDA ratio of 3.15, indicating significant leverage. However, its expected earnings of $6.05 per share point to a lower forward P/E ratio of 15.4, suggesting potential undervaluation.
It's important to note that this analysis is not personalized financial advice, and individuals should conduct their own research or consult with a financial advisor before making any investment decisions.
