Targa Resources 2025 Q1 Earnings Misses Targets as Net Income Declines 15.9%

Targa Resources (TRGP) reported its fiscal 2025 Q1 earnings on May 1, 2025. The company's net income fell to $279.80 million, a 15.9% decline compared to $332.60 million in Q1 2024. Targa's EPS decreased by 26% to $0.91, down from $1.23 in the same period last year. Despite this, the company maintained its guidance for the full year. Targa's adjusted EBITDA for Q1 2025 reached $1.2 billion, marking a 22% year-over-year increase, driven by strategic transactions and expanded marketing margins.

Revenue
Targa Resources recorded total revenue of $4.56 billion for Q1 2025, mirroring its revenue from the same quarter in 2024. Segment-specific revenues include $3.88 billion from commodity sales, $4.18 billion from contracts with customers, and $681.90 million from natural gas. Additionally, the NGL segment contributed $3.38 billion, while condensate and crude oil brought in $117 million. Fees from midstream services generated $677.10 million, and gathering and processing added $469 million. Revenues from NGL transportation, fractionation, and services totaled $76.80 million, with storage, terminaling, and export contributing $131.80 million. However, non-customer revenue and derivative activities resulted in losses of $291.30 million and $285.20 million, respectively.

Earnings/Net Income
Targa Resources experienced a significant decline in both EPS and net income for Q1 2025, with EPS dropping 26% to $0.91 and net income decreasing 15.9% to $279.80 million compared to the previous year. The reduction in EPS indicates a challenging quarter for the company.

Price Action
The stock price of Targa Resources has dropped 3.94% during the latest trading day, has tumbled 8.28% during the most recent full trading week, and has plummeted 19.02% month-to-date.

Post-Earnings Price Action Review
The post-earnings analysis for Targa Resources (TRGP) suggests that, historically, the company's earnings report metrics such as revenue, net income, and EPS have often led to positive short-to-medium-term gains for investors. However, the current scenario shows a notable decline in stock price in reaction to recent earnings, reflecting investor concerns. The backtest results indicate varying win rates of 47.62% over three days, 57.14% over ten days, and 52.38% over thirty days following earnings releases, suggesting a mixed short-term performance. Average returns post-earnings are 1.21% over three days, 4.86% over ten days, and 5.47% over thirty days, indicating a potential for recovery despite initial declines. Historically, the maximum return observed was 21.39% on day 78 post-earnings. Investors may still find value in the stock, anticipating potential gains if the earnings metrics exceed expectations or are otherwise perceived positively.

CEO Commentary
Targa Resources Corp.'s CEO highlighted the company's record Q1 2025 adjusted EBITDA of $1.2 billion, a 22% year-over-year increase, attributed to contributions from the Badlands transaction and enhanced marketing margins. Despite winter weather impacting volumes in the Gathering and Processing and Logistics and Transportation segments, the CEO expressed optimism about future performance, citing significant increases in Permian volumes since the quarter's end. The company remains strategically focused on growth investments to capitalize on market opportunities.

Guidance
Targa maintains its full-year 2025 adjusted EBITDA forecast between $4.65 billion and $4.85 billion, driven by anticipated growth in its Permian G&P footprint. The company expects record volumes in Permian, NGL pipeline transportation, fractionation, and LPG export in 2025, with growth concentrated in the second half of the year. Net growth capital expenditures are projected between $2.6 billion and $2.8 billion for 2025.

Additional News
Recently, Targa Resources announced a definitive agreement to repurchase all outstanding preferred equity in Targa Badlands LLC from funds managed by Blackstone for approximately $1.8 billion in cash. This move represents a strategic refinancing of higher-cost preferred equity with lower-cost debt capital, promising significant cash savings. Additionally, Targa declared an increase in its quarterly cash dividend to $1.00 per common share, effective for Q1 2025, reflecting a 33% year-over-year increase. The company also completed an underwritten public offering of Senior Unsecured Notes aggregating $2.0 billion, aimed at funding the equity repurchase and general corporate