Some Analysts Just Cut Their Targa Resources Corp. (NYSE:TRGP) Estimates

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.

After the downgrade, the five analysts covering Targa Resources are now predicting revenues of US$19b in 2023. If met, this would reflect a modest 5.0% improvement in sales compared to the last 12 months. Per-share earnings are expected to jump 22% to US$4.60. Prior to this update, the analysts had been forecasting revenues of US$20b and earnings per share (EPS) of US$4.23 in 2023. If anything, the analysts look to have become slightly more optimistic overall; while they decreased their revenue forecasts, EPS predictions increased and ultimately earnings are more important.

Check out our latest analysis for Targa Resources

The consensus has made no major changes to the price target of US$100, suggesting the forecast improvement in earnings is expected to offset the decline in revenues this year.

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. It's pretty clear that there is an expectation that Targa Resources' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 10% growth on an annualised basis. This is compared to a historical growth rate of 20% over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 2.5% per year. Factoring in the forecast slowdown in growth, it's pretty clear that Targa Resources is still expected to grow faster than the wider industry.

The Bottom Line

The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Unfortunately, they also downgraded their revenue estimates, and our data indicates sales are expected to outperform the wider market. Even so, earnings per share are more important to the intrinsic value of the business. 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.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on Targa Resources' mountain of debt, which could lead to some belt tightening for shareholders. You can learn more about our debt analysis for free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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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.