Targa: We Upgrade Its Capital Allocation Rating to Standard From Poor

After several years of thoughtful capital allocation moves, we are upgrading Targa’s Capital Allocation rating to Standard from Poor. Management, in our view, has learned from past mistakes and is committed to a more thoughtful and shareholder-friendly capital allocation policy. The latest example is its willingness to commit to a policy where it will return 40%-50% of adjusted operating cash flow to shareholders via dividends and opportunistic (not programmatic) share buybacks. Our fair value estimate of $79 per share remains unchanged, as does our no moat rating.