On Monday, EQT Corp. (NYSE:EQT (ST:EQTAB)) received an upgraded stock rating from Mizuho (NYSE:MFG), shifting from Neutral to Outperform, accompanied by a price target increase to $57.00 from the previous $48.00. The upgrade reflects the company's position as the second-largest gas producer in the U.S. and a key beneficiary of favorable natural gas market fundamentals.
With a current market capitalization of $27.2 billion and trading near its 52-week high of $48.02, EQT has demonstrated strong momentum, delivering a 20% return year-to-date. According to InvestingPro data, seven analysts have recently revised their earnings estimates upward for the upcoming period.
Mizuho's previous Neutral stance was influenced by EQT's increased leverage following the ETRN deal, with a third-quarter trailing twelve-month Net Debt/EBITDA ratio of approximately 2.0x, compared to the peer average of around 1.3x. The company's recent financial moves, including a $3.5 billion joint venture with Blackstone (NYSE:BX) for regulated midstream assets and the sale of NEPA assets for $1.25 billion, have surpassed their asset sales targets set for balance sheet deleveraging.
InvestingPro analysis reveals the company's last twelve months EBITDA stands at $2.6 billion, with current financial health metrics indicating some concerns about short-term liquidity. For comprehensive analysis of EQT's financial position and over 30 key metrics, subscribers can access the detailed Pro Research Report.
EQT still aims to generate an additional $2-3 billion in free cash flow in 2025 to achieve their $7.5 billion total debt target by the end of that year. With approximately 60% of its 2025 natural gas production hedged at a floor of roughly $3.25 per million British thermal units (mmbtu), the company's financial targets seem achievable unless Henry Hub prices average below $2.75/mmbtu.
The integration of ETRN is expected to enable EQT to implement operational improvements, such as compression, which were outlined when the deal was announced in March. These enhancements are anticipated to lower cash flow breakeven points, providing a buffer for long-term cash generation and allowing shareholders to gain from potential increases in U.S. natural gas prices.
While EQT maintains a dividend yield of 1.38% and has raised its dividend for three consecutive years, InvestingPro indicates the stock is currently trading above its Fair Value, with a relatively high P/E ratio of 67x.
EQT is also expanding its market presence, particularly in the Southeast power market, through the extension of the MVP pipeline. With the major steps of balance sheet deleveraging completed, the company is now positioned to focus on enhancing its marketing portfolio, which could include LNG, AI datacenter, and increased out-of-basin exposure.
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