Targa Earnings: Unexpected LPG Strength Offsets G&P Weakness

Targa’s first-quarter results were boosted, in our view, by unexpected LPG strength, which helped offset weakness elsewhere. The firm reiterated 2023 EBITDA guidance at a midpoint of $3.6 billion, with our forecast at $3.65 billion, despite commodity prices being lower than their embedded assumptions. While Targa is maintaining its 2023 EBITDA guidance, it typically only hedges one year out. This position means that while it still may be able to offset lower oil and gas prices in 2023, 2024 results may be more materially impacted as it resets its hedging position. We expect to maintain our $72 per share fair value estimate and no-moat rating.