Phillips 66 Partners (NYSE: PSXP) and Targa Resources (NYSE:TRGP) are both mid-cap oils/energy companies, but which is the better business? We will compare the two companies based on the strength of their valuation, dividends, profitability, institutional ownership, risk, analyst recommendations and earnings.
Volatility and Risk
Phillips 66 Partners has a beta of 1.52, indicating that its share price is 52% more volatile than the S&P 500. Comparatively, Targa Resources has a beta of 2.22, indicating that its share price is 122% more volatile than the S&P 500.
This table compares Phillips 66 Partners and Targa Resources’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Phillips 66 Partners||45.35%||23.01%||9.97%|
This is a summary of recent ratings for Phillips 66 Partners and Targa Resources, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Phillips 66 Partners||1||1||9||0||2.73|
Phillips 66 Partners presently has a consensus target price of $57.13, suggesting a potential upside of 16.96%. Targa Resources has a consensus target price of $54.38, suggesting a potential upside of 15.86%. Given Phillips 66 Partners’ higher probable upside, equities analysts clearly believe Phillips 66 Partners is more favorable than Targa Resources.
Phillips 66 Partners pays an annual dividend of $2.46 per share and has a dividend yield of 5.0%. Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 7.8%. Phillips 66 Partners pays out 101.2% 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 -183.8% of its earnings in the form of a dividend. Phillips 66 Partners has raised its dividend for 3 consecutive years and Targa Resources has raised its dividend for 6 consecutive years. Targa Resources is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Earnings and Valuation
This table compares Phillips 66 Partners and Targa Resources’ top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Phillips 66 Partners||$781.00 million||6.91||$461.00 million||$2.43||20.10|
|Targa Resources||$7.65 billion||1.32||$1.02 billion||($1.98)||-23.70|
Targa Resources has higher revenue and earnings than Phillips 66 Partners. Targa Resources is trading at a lower price-to-earnings ratio than Phillips 66 Partners, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
43.0% of Phillips 66 Partners shares are owned by institutional investors. Comparatively, 87.9% of Targa Resources shares are owned by institutional investors. 1.9% of Targa Resources shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Targa Resources beats Phillips 66 Partners on 11 of the 17 factors compared between the two stocks.
About Phillips 66 Partners
Phillips 66 Partners LP (Phillips 66) owns, operates, develops and acquires fee-based crude oil, refined petroleum product and natural gas liquids (NGL) pipelines, terminals and other transportation and midstream assets. The Company’s assets consist of systems, such as Clifton Ridge Crude System, Eagle Ford Gathering System, Ponca Crude System, Billings Crude System, Borger Crude System, Sweeny to Pasadena Products System, Hartford Connector Products System, Gold Line Products System, Cross-Channel Connector Products System, Ponca Products System, Billings Products System, Bayway Products System, Standish Pipeline, Borger Products System, River Parish NGL System, Medford Spheres, Bayway Rail Rack, Ferndale Rail Rack, Sand Hills/Southern Hills Joint Ventures, Explorer Pipeline Joint Venture, Bakken Joint Ventures, Bayou Bridge Pipeline Joint Venture, STACK Pipeline Joint Venture, and Sweeny Fractionator and Clemens Caverns.
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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