On Friday, Raymond (NS:RYMD) James adjusted its stance on EnLink Midstream, LLC (NYSE:NYSE:ENLC), moving its rating from Outperform to Market Perform. The shift in rating comes amid considerations of the stock's current valuation and potential acquisition costs by ONEOK , Inc. (NYSE:NYSE:OKE).
The downgrade reflects a reassessment of the risk/reward balance for ENLC shares. The analyst pointed out that although there is a chance that OKE may offer a premium for ENLC shares, the recent $14.90 per share price received by Global Infrastructure Partners (GIP) could represent the upper limit of what OKE is willing to pay.
The analyst's statement highlighted a change in perspective regarding the attractiveness of ENLC's stock. The current market price does not present the same appeal as before, especially when compared to other investment opportunities within the midstream sector, which is experiencing structural tailwinds.
This reevaluation by Raymond James suggests a more cautious outlook on ENLC's future performance in the stock market. The analysis indicates that, at the current price levels, ENLC's stock does not offer a compelling case for an Outperform rating.
Investors and market watchers will likely monitor ENLC's stock performance and any further developments regarding a potential acquisition by OKE, as these factors could influence future valuations and analyst ratings.
In other recent news, ONEOK has completed its $2.6 billion acquisition of Medallion Midstream, expanding its assets in the Permian Basin's Midland region. This strategic move is expected to yield substantial commercial synergies, given the interconnectedness of the Medallion and ONEOK pipelines. In related news, EnLink Midstream, in which ONEOK holds a 43% stake, is set to release its third quarter 2024 earnings, with projections from Mizuho (NYSE:MFG) Securities and Citi suggesting a Q3 EBITDA of $325 million.
Following ONEOK's acquisition, Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC) have downgraded EnLink Midstream's stock from Overweight to Equalweight. EnLink Midstream has also been involved in the inauguration of the Matterhorn Express pipeline, a joint venture expected to boost U.S. oil production. ONEOK continues to maintain its quarterly dividend at 99 cents per share, leading to an annualized dividend rate of $3.96 per share.
These are recent developments in the companies' operations, which have seen significant changes after ONEOK's acquisition of a major stake in EnLink Midstream, leading to leadership changes and the appointment of ONEOK's Pierce H. Norton II as Board Chairman.
InvestingPro Insights
Recent data from InvestingPro adds context to Raymond James' downgrade of EnLink Midstream, LLC (NYSE:ENLC). The stock's current market cap stands at $7.12 billion, with a price-to-earnings ratio of 43.48 based on the last twelve months as of Q3 2024. This high P/E ratio aligns with Raymond James' concerns about valuation, as does the price-to-book ratio of 7.76.
InvestingPro Tips highlight that ENLC is trading near its 52-week high and has shown a strong return over the last three months, with data indicating a 28.3% price total return in that period. This recent performance may have contributed to Raymond James' view that the stock's current price doesn't offer the same appeal as before.
Despite the downgrade, ENLC has some positive attributes. An InvestingPro Tip notes that the company has maintained dividend payments for 11 consecutive years, with a current dividend yield of 3.42%. This could be attractive to income-focused investors, even as the overall risk/reward balance shifts.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for ENLC, providing a deeper understanding of the company's financial health and market position.
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