Shares of Targa Resources Corp. TRGP closed at $297.77 on Tuesday, near its 52-week high of $305.08, following a surge of 85.2% in a year. The stock price rally was followed by a positive long-term agreement with ExxonMobil Holdings Corporation XOM across the Permian.During the same time period, the company’s shares outperformed the sub-industry and the broader oil and energy sector’s rise of 51.6% and 37.6%, respectively.
Peer comparison further highlights the strength, as Targa Resources conveniently outpaced its peers: Sunoco LP SUN and Western Midstream Partners, LP WES, which climbed 48.8% and 30.4%, respectively, in the past year.
TRGP Outperforms Industry, Sector & Peer Companies (SUN & WES)
Image Source: Zacks Investment Research
Targa Resources continues to benefit from strong demand for its Permian and Gulf Coast midstream network, enabling the company to convert this demand into steady and durable cash flows. Headquartered in Houston, TX, Targa Resources operates at the center of the U.S. midstream energy infrastructure and delivers essential services across the natural gas and natural gas liquids (NGL) value chain. Its operations include gathering, treating, compressing, processing, transporting and storing these resources. The company runs its business through two main segments — Gathering & Processing and Logistics & Transportation. A significant portion of Targa Resources’ revenues comes from fee-based contracts, which help provide a relatively stable income stream even during periods of commodity price volatility.
That said, investors are now weighing whether TRGP’s strong rally still has room to continue or if much of its future growth is already priced into the stock. With solid momentum and an encouraging outlook, the company’s prospects merit a closer look before deciding whether to buy, hold or lock in profits.
Factors Favoring Targa Resources Stock
Long-Term Growth Visibility From ExxonMobil Agreements: Targa Resources’ new 20-year agreements with ExxonMobil provide strong long-term volume visibility and reinforce its growth outlook. The contracts add significant acreage dedications across the Permian Delaware and Midland basins, covering gathering, processing, treating, NGL transportation and fractionation through 2046. The agreements are expected to drive substantial volume growth across TRGP’s integrated infrastructure and support growth well into the next decade. New processing plants and the Bull Run II pipeline further position the company to capture rising Permian production, supporting durable and growing adjusted free cash flow.
A Positive 2026 Earnings Estimate: The Zacks Consensus Estimate for TRGP’s 2026 earnings is pegged at $11.01 per share, indicating 29.7% year-over-year growth. Additionally, the consensus mark for 2026 revenues is pegged at $19.12 billion, also implying a 12.3% year-over-year rise. The positive earnings estimate outlook makes the stock attractive for investors. In comparison to Targa Resources, the Zacks Consensus Estimate of the above-mentioned peer companies, namely Sunoco and Western Midstream, also indicates positive year-over-year growth for 2026.
TRGP’s Earnings Estimate Overview
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Strong Permian Volume Growth Supports Long-Term Earnings: Targa Resources is benefiting from robust producer activity across the Permian Basin, with second-quarter volumes reaching a record 7.2 Bcf/d, up 7% sequentially and 14% year over year. Despite 200-400 MMcf/d of gas being shut in during the quarter because of weak Waha prices, volumes still increased by 450 MMcf/d from the first quarter. Most price-related curtailments returned in July, while producer activity remains strong. Targa Resources expects continued volume growth through the second half of 2026 and into 2027, supported by improving gas prices and better takeaway capacity. This growing throughput should support its gathering, processing and downstream businesses.
Major Growth Projects Could Drive Significant Future EBITDA: Targa Resources has a substantial portfolio of organic projects that should expand its processing, transportation, fractionation and export capacity. Five Permian processing plants — Copperhead I and II, Yeti I and II, and Roadrunner III — are on track, while East Driver has already started operations ahead of schedule. Train 11 is online and highly utilized, with Trains 12 and 13 progressing. Speedway and the LPG export expansion are expected in the third quarter of 2027 and should provide meaningful operating leverage. Management expects these investments to support a strong EBITDA and free-cash-flow inflection over time.
TRGP: Risks to Watch
High Growth Capital Spending Could Pressure Free Cash Flow: Targa Resources' growth opportunity requires substantial capital investment, which could constrain free cash flow and shareholder returns in the near term. The company expects approximately $4.5 billion of net growth capital spending in 2026, compared with only $250 million of maintenance capital. Although these investments are designed to generate high returns and support future EBITDA growth, the scale of spending means the company remains heavily dependent on successful project execution and continued volume growth. Management itself expects the more meaningful free-cash-flow inflection to occur only after major projects such as Speedway and the LPG export expansion come online in the third quarter of 2027.
Marketing Gains Are Likely to Moderate: A significant portion of TRGP's exceptional first-half performance came from market optimization opportunities that were not incorporated into its original guidance. Management indicated that the first half benefited from approximately $250 million of optimization margin, but expects materially lower marketing opportunities in the second half as basis spreads narrow and Waha gas prices improve. Management specifically acknowledged that the third quarter will face a headwind from weaker marketing benefits compared with the second quarter. Therefore, investors should not assume that the unusually strong marketing contribution seen earlier in 2026 will continue at the same level.
Commodity Prices Still Create Some Earnings Exposure: Although Targa Resources has increasingly shifted its G&P contracts toward fee-based structures, part of its portfolio remains commodity-sensitive. Management noted that commodity prices were a slight headwind to G&P results during the second quarter, while the company also remains below aggregate fee-floor levels across its portfolio. A sustained improvement in gas and NGL prices could eventually provide a tailwind, but near-term earnings remain exposed to commodity-price movements and the balance between gas, NGL and crude economics. This creates some uncertainty around per-unit margins even when physical volumes continue to grow strongly.
TRGP’s Premium Valuation: From a valuation perspective — in terms of Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA) ratio — Targa Resources is trading at a premium of 15.24 compared with the industry average of 12.35. The stock is also trading above its five-year mean of 12.02.
TRGP’s Valuation
Image Source: Zacks Investment Research
Conclusion
Targa Resources remains a compelling midstream growth story, supported by its 20-year agreements with ExxonMobil, which provide strong long-term volume visibility along with strong stock performance as compared to peers like SUN and WES, while record Permian volumes and robust producer activity also support sustained growth. A substantial pipeline of processing, fractionation and export projects, along with positive 2026 earnings and revenue estimates, should strengthen EBITDA and free cash flow over time.
However, these opportunities come with meaningful risks. TRGP’s approximately $4.5 billion of 2026 growth capital spending could constrain near-term free cash flow and make returns dependent on successful project execution. In addition, marketing gains are expected to moderate, while commodity-price exposure could create earnings volatility. The stock also trades at a premium valuation against its industry average.
Given the company's attractive long-term growth prospects but limited margin for error at current valuation levels, retaining this Zacks Rank #3 (Hold) company appears prudent. Existing investors can benefit from future growth execution, while new investors may prefer to wait for a more attractive entry point or greater visibility on project returns and volume growth.
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