On Thursday, Stifel, a financial services firm, upgraded DT Midstream (NYSE: DTM) stock from Hold to Buy and increased the price target from $89.00 to $106.00. The upgrade comes as the stock has demonstrated remarkable strength, posting an 81.3% gain year-to-date according to InvestingPro data. The firm's optimism is partly due to DT Midstream's recent strategic move in the natural gas infrastructure sector.
DT Midstream, which has been active in expanding its operations, recently announced an acquisition of a natural gas pipeline. This move is expected to propel the company past the $1 billion earnings before interest, taxes, depreciation, and amortization (EBITDA) threshold. Stifel believes that this financial milestone, along with a more diversified customer base, increases the likelihood of DT Midstream receiving an improved credit rating from S&P.
The analyst from Stifel noted that while the year-end 2025 leverage is now anticipated to rise to 3.7 times, up from the previous estimate of 3.4 times, the impact is considered manageable. This perspective is based on the highly contracted nature of the assets DT Midstream has acquired, which provides a stable cash flow and reduces financial risk.
Stifel's revised price target and upgrade reflect confidence in DT Midstream's strategic direction and financial prospects. The company's focus on becoming a leading player in natural gas infrastructure is seen as a significant positive development, despite the slight uptick in leverage forecasted for the end of 2025.
In other recent news, DT Midstream has made significant strides in its financial and growth strategies. The company has inked a $1.2 billion deal to acquire three natural gas transmission pipelines, namely the Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, from ONEOK (NYSE:OKE), Inc. This acquisition, expected to close between late 2024 and early 2025, aligns with DT Midstream's focus on natural gas assets and is projected to boost revenue from its pipeline segment.
In a bid to extend its financial flexibility, DT Midstream has entered into two key amendments to its credit agreement. One amendment extends the maturity date of its revolving credit facility, while the other allows the company to secure additional bridge loans to fund its pipeline acquisition.
Analysts have also weighed in on these developments. Citi has upgraded DT Midstream's stock from Neutral to Buy following the acquisition announcement, while Goldman Sachs has revised its price target for DT Midstream to $74, maintaining a sell rating.
The company has also increased its adjusted EBITDA guidance for 2024 to a range of $950 million to $980 million and is exploring new power and data center opportunities, with six potential projects currently under discussion. These are the latest developments that offer insights into DT Midstream's future growth prospects.
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