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On Thursday, Mizuho (NYSE:MFG) Securities maintained a positive outlook on Targa Resources (NYSE:TRGP), increasing the price target on the company’s shares to $226 from the previous target of $208, while keeping an Outperform rating. The adjustment reflects Targa Resources’ strong performance and encouraging growth prospects, particularly in the Permian Basin. With a current market capitalization of $45.67 billion and trading near its 52-week high of $218.51, InvestingPro analysis suggests the stock is currently trading above its Fair Value, despite its impressive growth metrics.
Gabriel Moreen, an analyst at Mizuho, highlighted Targa Resources’ impressive 24.1% gain since the third-quarter update of 2024, outperforming the AMEI index’s 10.9% during the same period. The company’s medium-term growth outlook appears to be on a better track than initially anticipated, as demonstrated by the expedited final investment decision (FID) on two new processing plants in the Permian region. InvestingPro data reveals even more impressive returns, with the stock delivering a 122.69% return over the past year and a 49.73% gain in the last six months. The company has also shown strong commitment to shareholder returns, with dividend growth of 50% in the last twelve months.
Although expectations are high for the company’s fourth-quarter 2024 update, which is set to be released tomorrow, continued positive commentary is anticipated around the Permian growth outlook. This could justify another year of elevated capital expenditures. The focus for investors, according to Moreen, is likely to shift to year-over-year growth expectations for inlet volumes, the timing of additional Permian processing facilities, and Targa’s strategy for downstream expansions to accommodate increasing gathering and processing (G&P) volumes.
The new price target of $226 is based on a target enterprise value to adjusted EBITDA multiple of 11.25 times the forecasted fiscal year 2027 adjusted EBITDA of $5,468 million. Mizuho’s revised estimates reflect confidence in the company’s future financial performance and strategic initiatives.
In other recent news, Targa Resources reported fourth quarter 2024 revenue of $4.41 billion, which was slightly below analyst estimates of $4.42 billion. The company achieved record adjusted EBITDA of $1.12 billion, marking a 17% increase from the previous year. Targa’s net income for the quarter rose to $351.0 million, up from $299.6 million in the same period last year. The company experienced strong volume growth in its Permian Basin operations, with natural gas inlet volumes rising by 15% compared to the fourth quarter of 2023. This increase contributed to higher fee-based income in its Gathering and Processing segment. Additionally, Targa saw record volumes in its NGL pipeline transportation, fractionation, and LPG export activities within the Logistics and Transportation segment. For the full year 2025, Targa projects adjusted EBITDA to range between $4.65 billion and $4.85 billion, indicating a 15% growth at the midpoint compared to 2024. The company also announced plans to recommend a 33% increase in its quarterly dividend to $1.00 per share starting in the first quarter of 2025.
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