Targa Resources (NYSE: TRGP) and Phillips 66 Partners (NYSE:PSXP) 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 profitability, institutional ownership, valuation, risk, analyst recommendations, earnings and dividends.

Profitability

This table compares Targa Resources and Phillips 66 Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Targa Resources -2.92% -0.64% -0.29%
Phillips 66 Partners 45.35% 23.01% 9.97%

Insider & Institutional Ownership

87.4% of Targa Resources shares are owned by institutional investors. Comparatively, 43.0% of Phillips 66 Partners shares are owned by institutional investors. 1.9% of Targa Resources shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Targa Resources pays an annual dividend of $3.64 per share and has a dividend yield of 7.7%. Phillips 66 Partners pays an annual dividend of $2.46 per share and has a dividend yield of 5.1%. Targa Resources pays out -183.8% of its earnings in the form of a dividend. 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 has raised its dividend for 3 consecutive years and Phillips 66 Partners has raised its dividend for 6 consecutive years. Targa Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Targa Resources and Phillips 66 Partners’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Targa Resources $7.65 billion 1.34 $1.02 billion ($1.98) -23.98
Phillips 66 Partners $781.00 million 6.83 $461.00 million $2.43 19.86

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.

Volatility & Risk

Targa Resources has a beta of 2.22, meaning that its share price is 122% more volatile than the S&P 500. Comparatively, Phillips 66 Partners has a beta of 1.52, meaning that its share price is 52% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for Targa Resources and Phillips 66 Partners, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Targa Resources 0 5 10 1 2.75
Phillips 66 Partners 1 1 9 0 2.73

Targa Resources presently has a consensus target price of $54.53, suggesting a potential upside of 14.83%. Phillips 66 Partners has a consensus target price of $57.13, suggesting a potential upside of 18.39%. Given Phillips 66 Partners’ higher possible upside, analysts plainly believe Phillips 66 Partners is more favorable than Targa Resources.

Summary

Targa Resources beats Phillips 66 Partners on 10 of the 17 factors compared between the two stocks.

Targa Resources Company Profile

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.

Phillips 66 Partners Company Profile

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.

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