Targa Benefits From Higher Volumes in Q3 Due to Recent Lucid Deal

Targa’s third-quarter results met our expectations, and the firm reaffirmed a midpoint of 2022 EBITDA at $2.9 billion. However, with natural gas liquids prices well below the firm’s assumptions underlying its guidance during the quarter, we’ve trimmed our 2023 estimates downward to account for lower spreads and fees. We now expect $3.2 billion in 2023 EBITDA compared with earlier forecasts of $3.3 billion. We continue to believe that Targa remains more exposed to volatility in hydrocarbon prices than peers within our North American midstream coverage universe. Despite the lower estimates, we are maintaining our $64-per-share fair value estimate and no-moat rating.