Why Shares of Targa Resources Are Trading Higher Today

What happened

Shares of Targa Resources (NYSE:TRGP) traded more than 11% higher as of 2:05 p.m. EDT after it was announced that the energy company will soon join the S&P MidCap 400 Index.

So what

The S&P MidCap 400 Index is composed of a wide range of publicly traded U.S. mid-cap stocks with a market capitalization ranging from $3.2 billion to $9.8 billion. Targa, one of the largest independent infrastructure companies in the U.S., currently has a market cap around $10.5 billion.

It replaces the property data company CoreLogic in the index. CoreLogic is getting acquired by the private equity and venture capital firms Stone Point Capital and Insight Partners in a deal soon expected to close.

Line on paper chart moving upward.

Image source: Getty Images.

Stocks tend to appreciate when they are added to an index because funds that track that index must now buy the stock. Also, being added to an index results in greater visibility for the stock.

Now what

Targa reported net income for common shareholders of more than $124 million in the first quarter of 2021, significantly up from the nearly $1.8 billion loss it reported in the first quarter of 2020. Energy companies got hit incredibly hard during the beginning of the pandemic and are now on the rebound as the world recovers.

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After the strong first quarter, Targa revised its outlook for the rest of the year and now believes it can generate full-year adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of between $1.8 billion and $1.9 billion, so things are certainly trending in the right direction for the company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/06/04/why-shares-of-targa-resources-are-trading-higher-t/

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