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On Wednesday, Citi reiterated its Neutral rating on Kinetik Holdings Inc. (NYSE:KNTK) with a consistent price target of $58.00. The firm's analysis suggests that Kinetik's first-quarter EBITDA may fall short of market expectations, projecting $251 million compared to the consensus estimate of $261 million. This forecast accounts for a recovery from a $15 million headwind related to Waha in the fourth quarter of 2024, which is expected to drive a sequential increase. The company, currently trading at $42.04, has seen its stock decline nearly 22% in the past week, though InvestingPro data shows it maintains a healthy 7.4% dividend yield.
Citi analysts believe that Kinetik's Alpine High volumes might have experienced curtailment in March due to negative Waha pricing. However, they note that Kinetik's available residue gas egress capacity should have been accessible to mitigate the impact of lost volumes and to leverage the price spread. The firm points out that market estimates possibly overlook two key factors: a rise in costs due to a contractual step-up in NGL egress, which shifts some volumes to a more expensive NGL takeaway pipeline, and the Barilla Draw acquisition, which is not anticipated to significantly contribute to EBITDA until the second quarter of 2025 when processing volumes are integrated into Kinetik's system. Despite these challenges, the company maintains strong fundamentals with an 18% revenue growth and a gross profit margin of 45% in the last twelve months.
Additionally, Citi analysts express caution regarding the company's guidance due to a recent sudden commodity price shock. If these prices persist without operational outperformance, they estimate that guidance could be pressured to approximately 1% below the midpoint. The analysis by Citi underscores the various elements that could influence Kinetik's financial performance and the challenges posed by the current commodity price environment. Based on InvestingPro's comprehensive analysis, which includes 13 additional key insights and a detailed Fair Value assessment, the stock appears to be trading above its Fair Value. Investors seeking deeper insights can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Kinetik Holdings Inc. reported its fourth-quarter 2024 earnings, which fell short of analysts' expectations. The company posted an earnings per share (EPS) of $0.01, significantly below the forecasted $0.48, and revenue of $385.72 million, missing the anticipated $393.45 million. Despite the earnings miss, Kinetik reported a 16% increase in full-year adjusted EBITDA and provided positive EBITDA guidance for 2025. In another development, Kinetik Holdings announced the pricing of a $250 million sustainability-linked senior notes offering, with proceeds intended for general corporate purposes, including debt repayment. Kinetik Holdings also expanded its credit facility to $250 million, extending its maturity to March 2026, providing the company with added financial flexibility. Additionally, Kinetik Holdings saw a change in its board as director Jesse Krynak resigned without citing any disagreements with the company's policies or practices. RBC Capital Markets recently adjusted its price target for Kinetik Holdings from $67.00 to $63.00 while maintaining an Outperform rating, reflecting optimism about the company's future performance despite recent financial results.
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