Targa Resources, Inc. (TRGP) Earnings & Analysis

Latest quarter

Targa reported Q2 FY2026 revenue of $4.4 billion, up 4.23% from $4.3 billion a year earlier. The company reported revenue of $4.4 billion against consensus revenue of $5.0 billion, or −10.4% against the consensus. Targa reported diluted EPS of $3.54, up 19.2% from $2.97 a year earlier, while adjusted EPS of $3.54 was 25.1% above the $2.83 consensus.

The filing attributed higher fees from midstream services to gas gathering and processing, transportation and fractionation, and export volumes. It said commodity sales were relatively flat, as lower natural-gas prices and the unfavorable impact of hedges were partly offset by higher NGL and condensate prices and higher volumes. Targa reported a gross margin of 48.2%, compared with 42.8% a year earlier, and an operating margin of 27.8%, compared with 24.3%. The company reported free cash flow of $431.2 million, compared with −$47.8 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Executive Officer Matt Meloy said adjusted EBITDA increased 38% year over year and that Permian volumes rose by more than 900 million cubic feet per day from a year earlier and by 450 million cubic feet per day from the first quarter. He said Permian growth also drove volumes in NGL transportation, fractionation and LPG exports.

President Jen Kneale told analysts that July brought another month of volume growth and said producers across Targa’s system were supported by higher crude oil prices, higher gas prices and an improved Permian egress situation. When analysts asked about the pace of future plant additions, Kneale said Targa had five plants under construction and was evaluating when to proceed with another Midland plant. She said the pace would depend on contracts already in place and additional commercial success.

Meloy said first-half results included $250 million of optimization margin that Targa had not assumed, and that narrower basis differentials affected part of that margin from its transportation position. He said the company was using a conservative assumption for marketing gains in the second half, while volumes that remained shut in could return during that period.

Kneale said marketing benefits would be lower in the third quarter than in the second quarter and that Targa expected to remain below fee-floor levels across its portfolio in the third quarter. She said higher gas prices could become a tailwind over time, while the company’s fee floors reflect both gas and NGL prices.

On ethane exports, Kneale said Targa continued to evaluate opportunities but did not characterize an expansion as necessary. Chief Financial Officer Will Byers said Targa continued to invest in integrated projects, declared a $1.25 second-quarter dividend and repurchased approximately $80 million of common stock during the quarter.

Guidance

Targa said it now expects FY2026 adjusted EBITDA to be toward the top end of its $5.7 billion to $5.9 billion range. Meloy said that outlook suggests 2026 adjusted EBITDA growth over 2025 may be close to $1.0 billion.