The latest analyst coverage could presage a bad day for Targa Resources Corp. (NYSE:TRGP), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. At US$71.63, shares are up 9.2% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.
After the downgrade, the ten analysts covering Targa Resources are now predicting revenues of US$20b in 2022. If met, this would reflect a solid 16% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$22b in 2022. The consensus view seems to have become more pessimistic on Targa Resources, noting the substantial drop in revenue estimates in this update.
We'd point out that there was no major changes to their price target of US$75.68, suggesting the latest estimates were not enough to shift their view on the value of the business. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Targa Resources, with the most bullish analyst valuing it at US$90.00 and the most bearish at US$54.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Targa Resources' growth to accelerate, with the forecast 16% annualised growth to the end of 2022 ranking favourably alongside historical growth of 9.8% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 2.7% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Targa Resources to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that analysts cut their revenue estimates for this year. They're also forecasting more rapid revenue growth than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Targa Resources after today.
Need some more information? We have estimates for Targa Resources from its ten analysts out until 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.