Targa Resources Corp. TRGP has solidified its position as the second-best performing Oil/Energy stock on the S&P 500 in 2024, delivering a remarkable return of more than 100%. Only Texas Pacific Land Corporation TPL has surpassed it, surging 123%. TRGP’s meteoric growth far outshines leading energy stocks like ExxonMobil XOM, up a modest 10.1%, and Chevron CVX, which edged up 0.7%.

TRGP, TPL, XOM, CVX Year-to-Date Stock Performance

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This extraordinary rally raises a key question: Can Targa sustain its impressive momentum in 2025? Backed by a dynamic growth strategy, operational strength and accelerating earnings, TRGP stands out as a compelling pick for forward-looking investors.

Expanding Infrastructure for Sustained Growth

Targa's growth is underpinned by aggressive investments in high-demand infrastructure. Six natural gas processing plants, two fractionators and an expanded NGL export terminal are on track for completion by 2026, pushing projected annualized EBITDA above $5 billion. These projects position Targa to capture rising demand for natural gas processing and exports, strengthening its revenue streams and ensuring long-term growth potential.

TRGP's Positive Earnings Momentum

Over the past 60 days, the Zacks Consensus Estimate for Targa’s 2024 earnings rose 6% to $6.26 per share, while the same for 2025 increased 8% to $8.06. Moreover, the company’s expected three-to-five-year earnings per share (EPS) growth rate of 40.5% significantly outpaces the industry average of 24.8%, underscoring its strong earnings outlook.
 

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Record Operational Performance

Targa delivered record operational volumes in the third quarter of 2024, bolstered by new assets in the Midland Basin and the Dayton NGL pipeline. Quarterly adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 9% sequentially to a record $1.1 billion. Consequently, the full-year 2024 adjusted EBITDA estimate is likely to be above the top end of the guidance of $3.95 billion to $4.05 billion. This operational success reflects Targa’s ability to execute its growth strategy effectively while maintaining core business stability, which is critical for sustaining shareholder confidence.

Targa Resources' Resilience Amid Volatility

Targa’s "take-or-pay" contracts provide a significant buffer against commodity price volatility, stabilizing cash flows even in weaker crude markets. This contract structure ensures predictable earnings, a feature many of its peers lack. It makes Targa a reliable choice for investors seeking exposure to midstream energy with reduced cyclical risks.

Dividend Growth Adds to Shareholder Value

Targa's commitment to returning value to shareholders is evident in its expectation for a 33% dividend hike, raising the annual payout to $4 per share in 2025. This increase signals management's confidence in cash flow stability and dedication to rewarding investors. For income-focused investors, this dividend hike enhances Targa's appeal, especially given its strong recovery from prior payout reductions.

Challenges for Targa Resources

Despite these strengths, Targa faces some headwinds. The company’s aggressive growth strategy is set to increase annual capital expenses in 2025, along with a rise in dividend outgo. This could elevate debt levels, potentially straining financial flexibility. Furthermore, Targa’s valuation, trading at a forward price/earnings ratio of 22, may already reflect much of its anticipated growth, limiting upside potential.
 

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Conclusion: TRGP Still a Buy

Targa Resources’ exceptional performance in 2024 is built on strong operational execution, strategic investments and a solid earnings trajectory. While rising debt and valuation concerns warrant caution, the company’s expanding infrastructure, robust earnings growth and resilience to market volatility provide a strong foundation for further gains. For investors, Targa Resources remains a buy, with the potential for another impressive year.

Currently, Targa Resources carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Chevron Corporation (CVX) : Free Stock Analysis Report

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