Pembina Pipeline Corp (NYSE: PBA) and Targa Resources (NYSE:TRGP) are both mid-cap oil & gas transportation services – nec companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, dividends, risk, earnings, analyst recommendations, valuation and institutional ownership.

Profitability

This table compares Pembina Pipeline Corp and Targa Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Pembina Pipeline Corp 12.12% 8.60% 3.85%
Targa Resources -2.92% -0.64% -0.29%

Dividends

Pembina Pipeline Corp pays an annual dividend of $1.73 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 8.3%. Pembina Pipeline Corp pays out 173.0% 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. Pembina Pipeline Corp has raised its dividend for 6 consecutive years. Targa Resources is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

50.1% of Pembina Pipeline Corp shares are owned by institutional investors. Comparatively, 87.5% 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 hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Pembina Pipeline Corp has a beta of 0.72, meaning that its stock price is 28% less volatile than the S&P 500. Comparatively, Targa Resources has a beta of 2.22, meaning that its stock price is 122% more volatile than the S&P 500.

Valuation and Earnings

This table compares Pembina Pipeline Corp and Targa Resources’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Pembina Pipeline Corp $3.22 billion 5.43 $351.92 million $1.00 34.81
Targa Resources $6.69 billion 1.41 -$187.30 million ($1.98) -22.17

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

Analyst Recommendations

This is a breakdown of recent recommendations for Pembina Pipeline Corp and Targa Resources, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Pembina Pipeline Corp 0 0 6 0 3.00
Targa Resources 0 7 9 1 2.65

Pembina Pipeline Corp currently has a consensus price target of $45.00, suggesting a potential upside of 29.27%. Targa Resources has a consensus price target of $54.41, suggesting a potential upside of 23.97%. Given Pembina Pipeline Corp’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Pembina Pipeline Corp is more favorable than Targa Resources.

Summary

Pembina Pipeline Corp beats Targa Resources on 9 of the 17 factors compared between the two stocks.

Pembina Pipeline Corp Company Profile

Pembina Pipeline Corporation is an energy transportation and service provider. The Company operates through four segments. The Conventional Pipelines segment consists of the tariff-based operations of pipelines and related facilities to deliver crude oil, condensate and natural gas liquids (NGL) in Alberta, British Columbia, Saskatchewan, and North Dakota, United States. The Oil Sands & Heavy Oil segment consists of the Syncrude, Horizon, Nipisi and Mitsue Pipelines, and the Cheecham Lateral. These pipelines and related facilities deliver synthetic crude oil produced from oil sands under long-term cost-of-service arrangements. The Gas Services segment consists of natural gas gathering and processing facilities. The Midstream segment consists of the Company’s interests in extraction and fractionation facilities, terminalling and storage hub services under a mixture of short, medium and long-term contractual arrangements.

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.

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