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What Drove Targa Resources’ Strong 3Q17 Results?

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What Drove Targa Resources’ Strong 3Q17 Results? PART 1 OF 5

Targa Resources’ Earnings Grew 13% in 3Q17

Higher EBITDA

Targa Resources (TRGP) reported its 3Q17 results on November 2, 2017. The company’s adjusted EBITDA1 rose 13.0% to $276.5 million from $245.3 million in 3Q16. 

The company’s revenues for the quarter were positively impacted by higher commodity prices, increased volumes, and higher gas processing fees.

Targa Resources’ Earnings Grew 13% in 3Q17

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As the chart above shows, nearly 60% of the company’s 3Q17 operating income came from Targa’s Gathering and Processing operations. Its Downstream operations contributed the remaining 40% to Targa’s operating income for the quarter. 

We’ll discuss the performance of the two segments in detail later in the series.

Dividends

On October 18, 2017, Targa Resources (TRGP) declared a dividend of $0.91 per share for 3Q17. This dividend remained unchanged from the previous quarter. Targa Resources has not increased its dividends for the last eight quarters.

Targa Resources’ distributable cash flow for 3Q17 was $186.6 million. The company plans to pay total dividends of $196.2 million and total Series A preferred stock dividends of $22.9 million for the quarter. As a result, its coverage ratio for 3Q17 is below 1.

Targa Resources is currently trading at a dividend yield of ~8.7%. This dividend yield is much higher than ~6.7% for Enterprise Products Partners (EPD), ~5.6% for ONEOK (OKE), and ~2.8% for Kinder Morgan (KMI). 

The Alerian MLP Index currently yields ~7.8%. In comparison, the SPDR S&P 500 ETF (SPY) (SPX-INDEX) yields ~2.0%.

Enterprise Products Partners reported a 5.0% rise in its 3Q17 EBITDA. You can learn more about EPD in Behind Enterprise Products Partners’ 3Q17 Results.

In the next part, we’ll analyze the performance of Targa’s Gathering and Processing segment in 3Q17.

  1. earnings before interest, tax, depreciation, and amortization
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