Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
On Friday, Goldman Sachs made adjustments to its financial outlook for Kinetik Holdings, Inc. (NYSE:KNTK), reducing the price target to $54.00 from the previous $61.00. Despite the price target cut, the firm maintained a Buy rating on the stock. Currently trading at $45.20, InvestingPro analysis suggests the stock is undervalued, though it trades at a relatively high P/E ratio of 47.6x. The move followed Kinetik’s first-quarter earnings for 2025, which, according to Goldman Sachs, were slightly better than their own estimates, particularly concerning the gas processing and gathering (G&P) margins.
Kinetik’s financial performance for the quarter did not meet the broader market consensus, but management confirmed its EBITDA guidance for 2025, suggesting a range of $1,090 million to $1,115 million. While they indicated a likelihood of achieving the lower end of this spectrum due to a potentially softer macroeconomic environment, the stock has shown resilience with an 8.37% gain over the past week. Notably, InvestingPro data shows the company maintains a significant 6.9% dividend yield, having raised dividends for three consecutive years. Goldman Sachs now forecasts Kinetik’s EBITDA to be just below the guided range for the year, while also acknowledging that any improvement in the macro outlook could lead to better-than-expected results.
Looking ahead, Kinetik has maintained its forecast for an EBITDA compound annual growth rate (CAGR) of 10% through to 2030. InvestingPro analysis reveals a FAIR overall financial health score of 2.38, with historical revenue growth showing strong momentum at 20.36% over the last twelve months. For deeper insights into Kinetik’s growth prospects and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers. This prediction is underpinned by the company’s confidence in the robustness of Permian basin gas production and several positive factors, such as natural gas liquids (NGL) recontracting, benefits from recently completed mergers and acquisitions, and cost-saving initiatives in compression and power. Goldman Sachs supports this outlook, projecting an approximate 11% CAGR from 2025 to 2028, although this is highly contingent on the successful execution of Kinetik’s Kings Landing 2 project, anticipated to reach a final investment decision in the second half of 2025.
Additionally, Kinetik’s management highlighted the company’s minimal committed capital expenditures for the year 2026 and beyond, which is expected to result in a robust free cash flow (FCF) yield. This projection aligns with current InvestingPro data showing a healthy FCF yield of 14% for the last twelve months. According to Goldman Sachs estimates, the FCF yield could be around 8%, or nearly 10% excluding growth-related capital expenditures for 2026. The firm also noted Kinetik’s expanded share buyback program, which could provide further support to the stock in less favorable market conditions. The reduction in the price target to $54 by Goldman Sachs reflects a slightly lower multiple, taking into account uncertainties related to growth prospects.
In other recent news, Kinetik Holdings Inc. reported its first-quarter 2025 financial results, which fell short of analysts’ expectations. The company posted earnings per share (EPS) of $0.05, significantly below the forecasted $0.36. Revenue also missed the mark, coming in at $443.26 million against an expected $477.05 million. Despite these misses, Kinetik Holdings demonstrated resilience with a 7% year-over-year growth in adjusted EBITDA, reaching $250 million for the quarter. Notably, the company’s Midstream Logistics Segment saw an 11% increase in EBITDA, while the Pipeline Transportation Segment experienced a slight decline of 2%. Looking ahead, Kinetik Holdings provided strong forward guidance, anticipating an annualized EBITDA of approximately $1.2 billion by the fourth quarter of 2025. The company also announced a $500 million share repurchase program, indicating confidence in its strategic initiatives. Additionally, analysts from Citi and JPMorgan expressed interest in the company’s long-term growth prospects and capital allocation strategies.
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