Comparing Sunoco (NYSE:SUN) & Targa Resources (NYSE:TRGP)

Sunoco (NYSE:SUN) and Targa Resources (NYSE:TRGP) are both energy companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, profitability, risk, valuation, earnings and analyst recommendations.

Risk & Volatility

Sunoco has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500. Comparatively, Targa Resources has a beta of 1.07, suggesting that its stock price is 7% more volatile than the S&P 500.

Earnings and Valuation

This table compares Sunoco and Targa Resources”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sunoco	$22.69 billion	0.35	$866.00 million	$5.55	9.29
Targa Resources	$16.38 billion	2.26	$1.28 billion	$5.43	31.42

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

Dividends

Sunoco pays an annual dividend of $3.59 per share and has a dividend yield of 7.0%. Targa Resources pays an annual dividend of $4.00 per share and has a dividend yield of 2.3%. Sunoco pays out 64.7% of its earnings in the form of a dividend. Targa Resources pays out 73.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Sunoco has raised its dividend for 3 consecutive years and Targa Resources has raised its dividend for 5 consecutive years. Sunoco is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Sunoco and Targa Resources’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sunoco	3.80%	20.34%	5.94%
Targa Resources	7.35%	30.48%	5.43%

Institutional and Insider Ownership

24.3% of Sunoco shares are held by institutional investors. Comparatively, 92.1% of Targa Resources shares are held by institutional investors. 1.3% of Targa Resources shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings for Sunoco and Targa Resources, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sunoco	0	0	4	0	3.00
Targa Resources	0	0	13	2	3.13

Sunoco currently has a consensus price target of $64.75, indicating a potential upside of 25.56%. Targa Resources has a consensus price target of $199.07, indicating a potential upside of 16.70%. Given Sunoco’s higher possible upside, analysts clearly believe Sunoco is more favorable than Targa Resources.

Summary

Targa Resources beats Sunoco on 12 of the 18 factors compared between the two stocks.

About Sunoco

Sunoco LP, together with its subsidiaries, distributes and retails motor fuels in the United States. It operates through two segments: Fuel Distribution and Marketing, and All Other. The Fuel Distribution and Marketing segment purchases motor fuel, as well as other petroleum products, such as propane and lubricating oil from independent refiners and oil companies and supplies it to company-operated retail stores, independently operated commission agents, and retail stores, as well as other commercial customers, including unbranded retail stores, other fuel distributors, school districts, municipalities, and other industrial customers. It owns and operates retail stores under the APlus and Aloha Island Mart brand names; and offers food, beverages, snacks, grocery and non-food merchandise, motor fuels, and other services. The All Other segment includes partnership credit card services, franchise royalties, and retail operations; and offers credit card processing, car washes, lottery, automated teller machines, money order, prepaid phone cards, and wireless services. The company was formerly known as Susser Petroleum Partners LP and changed its name to Sunoco LP in 2014. Sunoco LP was founded in 1886 and is headquartered in Dallas, Texas.

About Targa Resources

Targa Resources Corp., together with its subsidiary, Targa Resources Partners LP, owns, operates, acquires, and develops a portfolio of complementary domestic midstream infrastructure assets in North America. It operates in two segments, Gathering and Processing, and Logistics and Transportation. The company is involved in gathering, compressing, treating, processing, transporting, and selling natural gas; storing, fractionating, treating, transporting, and selling natural gas liquids (NGL) and NGL products, including services to liquefied petroleum gas exporters; and gathering, storing, terminaling, purchasing, and selling crude oil. It is also involved in the purchase and resale of NGL products; and sale of propane, as well as provision of related logistics services to multi-state retailers, independent retailers, and other end-users. In addition, the company offers NGL balancing services; and transportation services to refineries and petrochemical companies in the Gulf Coast area, as well as purchases, markets, and resells natural gas. As of December 31, 2023, it leased and managed approximately 605 railcars; 137 tractors; and 6 vacuum trucks and 2 pressurized NGL barges. Targa Resources Corp. was incorporated in 2005 and is headquartered in Houston, Texas.