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Tuesday, Kinetik Holdings Inc. (NYSE:KNTK) received an upgrade from Citi, with analysts moving the stock rating from Neutral to Buy. The firm also adjusted Kinetik’s price target to $55.00, down from the previous $58.00. This adjustment comes after a significant decline of over 20% in Kinetik’s stock price, currently trading at $44.95 with a 23.5% drop over the past six months. According to InvestingPro data, the stock offers a substantial 6.94% dividend yield, though it trades at a relatively high P/E ratio of 47.6.
Citi’s analysts believe that Kinetik is well-positioned for growth, anticipating an approximate 10% EBITDA compound annual growth rate (CAGR) through 2029, even without substantial volume growth from the Permian Basin. The company’s current EBITDA stands at $523.32 million, with impressive revenue growth of 20.36% over the last twelve months. InvestingPro analysis shows the company maintains a FAIR financial health score, with detailed metrics and growth projections available in the comprehensive Pro Research Report. They highlight several factors contributing to this outlook, including $175 million in potential upside from contracting tailwinds, $100 million from cost savings in compression and power, and $75 million from the Kings Landing 2 processing plant, contingent on modest volume growth over the next four years.
The analysts also foresee a reduction in capital expenditures due to slower activity in the industry, which they expect to result in a free cash flow (FCF) yield exceeding 10% over the next four years. They project that Kinetik will fully utilize and potentially exhaust its new $0.5 billion share repurchase program, which represents 7% of the market cap, by the end of 2027, possibly earlier.
The revision of the valuation to $55 from $58 by Citi reflects a more conservative outlook on the growth of the Permian Basin. Despite the reduction in the price target, the upgrade to a Buy rating indicates a positive perspective on the stock’s future performance based on the company’s individual growth prospects and financial strategies.
In other recent news, Kinetik Holdings Inc. reported first-quarter 2025 earnings that did not meet analysts’ expectations, with earnings per share (EPS) at $0.05 compared to the anticipated $0.36. The company’s revenue also fell short of projections, totaling $443.26 million against a forecast of $477.05 million. Despite these figures, Kinetik Holdings demonstrated resilience with a 7% year-over-year increase in adjusted EBITDA, reaching $250 million. Goldman Sachs adjusted its financial outlook for the company, lowering the price target to $54 from $61, yet maintaining a Buy rating. The firm noted that while Kinetik’s earnings were slightly better than its own estimates, they did not meet broader market consensus. Looking ahead, Kinetik has confirmed its EBITDA guidance for 2025, with expectations ranging from $1,090 million to $1,115 million. The company also highlighted a strong future outlook, anticipating an annualized EBITDA of approximately $1.2 billion by the fourth quarter of 2025. Additionally, Kinetik Holdings has expanded its share buyback program, which could provide further support to the stock amidst less favorable market conditions.
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