On Friday, Truist Securities revised its price target on Targa Resources Corp (NYSE: NYSE:TRGP), a leading provider of midstream services in the Permian Basin. The firm reduced the stock's price target to $220 from the previous $225, while retaining a Buy rating on the shares. Currently trading at $186.15 with a market capitalization of $40.6 billion, Targa has delivered impressive returns of over 123% in the past year, according to InvestingPro data.
The adjustment comes amid industry updates indicating that major producers in the Permian Basin are not expected to slow down production. According to the securities firm, Targa Resources is poised to benefit from the continued robust activity in the region due to its status as the largest gatherer and processor there.
The company's significant capital expenditures on key projects such as the Daytona NGL Pipeline and Trains 9 and 10 are anticipated to reinforce its leading position. InvestingPro analysis shows the company maintains a "GOOD" financial health score, with strong profit metrics despite its substantial investments.
The firm's decision to trim the price target was influenced by updated expectations for the Permian Basin. Despite the slight decrease, the firm's outlook for Targa Resources remains positive, with the expectation that the company will display some of the strongest growth within its peer group.
The updated price target is based on a more precise assessment of the company's gathering and processing (G&P) profitability. The new target reflects a 2025 EBITDA estimate of approximately $4.7 billion, which is applied to a 12.0x multiple, roughly in line with the peer average. Additionally, the price target incorporates a 2025 free cash flow (FCF) estimate of around $2.0 billion, applied to a 3.0% yield. These figures underscore the firm's confidence in Targa Resources' financial prospects and its role in the energy sector.
In other recent news, Targa Resources Corp. reported a significant increase in its third-quarter earnings for 2024, marking a record adjusted EBITDA of $1.07 billion. This growth was attributed to increased volumes in the Permian region and a strategic shift to a fee-based model, which insulated 90% of the company's margins from commodity price fluctuations.
In response to these positive developments, both Stifel and Truist Securities raised their price targets for Targa Resources to $224 and $225 respectively, while maintaining a Buy rating. RBC Capital Markets also increased Targa Resources' stock target, keeping an Outperform rating, following the announcement of strong Q3 results and an upward revision of full-year 2024 guidance.
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