Reviewing Summit Midstream Partners (NYSE:SMLP) & Targa Resources (TRGP)

Summit Midstream Partners (NYSE: SMLP) and Targa Resources (NYSE:TRGP) are both energy companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, profitability, dividends, earnings and analyst recommendations.

Volatility & Risk

Summit Midstream Partners has a beta of 1.65, suggesting that its share price is 65% more volatile than the S&P 500. Comparatively, Targa Resources has a beta of 2.22, suggesting that its share price is 122% more volatile than the S&P 500.

Dividends

Summit Midstream Partners pays an annual dividend of $2.30 per share and has a dividend yield of 10.5%. Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 7.4%. Summit Midstream Partners pays out 157.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Targa Resources pays out -143.3% of its earnings in the form of a dividend. Summit Midstream Partners has raised its dividend for 4 consecutive years and Targa Resources has raised its dividend for 7 consecutive years.

Earnings & Valuation

This table compares Summit Midstream Partners and Targa Resources’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Summit Midstream Partners $402.36 million 4.07 -$40.91 million $1.46 15.03
Targa Resources $6.69 billion 1.60 -$187.30 million ($2.54) -19.50

Summit Midstream Partners has higher earnings, but lower revenue than Targa Resources. Targa Resources is trading at a lower price-to-earnings ratio than Summit Midstream Partners, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Summit Midstream Partners and Targa Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Summit Midstream Partners 24.14% 11.61% 4.31%
Targa Resources -7.28% -12.69% -4.46%

Analyst Ratings

This is a summary of current ratings and target prices for Summit Midstream Partners and Targa Resources, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Summit Midstream Partners 1 1 4 0 2.50
Targa Resources 0 9 8 1 2.56

Summit Midstream Partners currently has a consensus price target of $25.00, suggesting a potential upside of 13.90%. Targa Resources has a consensus price target of $53.59, suggesting a potential upside of 8.22%. Given Summit Midstream Partners’ higher possible upside, equities analysts plainly believe Summit Midstream Partners is more favorable than Targa Resources.

Institutional & Insider Ownership

48.8% of Summit Midstream Partners shares are held by institutional investors. Comparatively, 87.4% of Targa Resources shares are held by institutional investors. 1.9% of Targa Resources shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

About Summit Midstream Partners

Summit Midstream Partners, LP focuses on developing, owning and operating midstream energy infrastructure assets. The Company’s segments include the Utica Shale, which includes its ownership interest in Ohio Gathering, as well as Summit Utica; the Williston Basin, which includes Bison Midstream, Polar and Divide and Tioga Midstream; the Marcellus Shale, which includes Mountaineer Midstream; the Barnett Shale, which includes DFW Midstream Services LLC (DFW Midstream), and the Piceance Basin /DJ Basins, which includes Grand River and Niobrara G&P. The Company’s assets are located in the producing areas of unconventional resource basins, primarily shale formations, in the continental United States. It provides natural gas gathering, treating and processing services, as well as crude oil and produced water gathering services pursuant to long-term and fee-based agreements with its customers.

About Targa Resources

Targa Resources Corp. is a midstream energy company in North America. It provides midstream services. Its segments include Gathering and Processing, and Logistics and Marketing (Downstream Business). It is engaged in the business of gathering, compressing, treating, processing and selling natural gas; storing, fractionating, treating, transporting and selling natural gas liquids (NGLs) and NGL products, including services to liquefied petroleum gas exporters; gathering, storing and terminalling crude oil, and storing, terminalling and selling refined petroleum products. The Gathering and Processing segment consists of gathering, compressing, dehydrating, treating, conditioning, processing, and marketing natural gas and gathering crude oil. The Logistics and Marketing segment includes all the activities necessary to convert mixed NGLs into NGL products and provides certain services, such as storing, fractionating, terminalling, transporting and marketing of NGLs and NGL products.

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