Mizuho raises Hess target to $199, maintains Neutral stance

On Tuesday, Mizuho (NYSE:MFG) Securities updated its financial model for Hess Corp . (NYSE: NYSE:HES), leading to an increase in the company's price target to $199 from the previous $194, while retaining a Neutral rating. The adjustment follows Hess's third-quarter 2024 earnings report and takes into account the ongoing acquisition process by Chevron Corporation (NYSE: NYSE:CVX). The Federal Trade Commission (FTC) has approved the acquisition during the third quarter of 2024, but the completion of the deal hinges on the resolution of an arbitration with Exxon Mobil Corporation (NYSE: NYSE:XOM) over interests in Guyana, expected to conclude in the third quarter of 2025.

The analysts at Mizuho have revised the Hess model to reflect the outcomes of the third-quarter earnings and the guidance provided for the fourth quarter of 2024 and the full year. The revised price target of $199 is based on the proposed exchange ratio of 1.025 in the acquisition deal with Chevron and incorporates the recently updated price target for Chevron itself. Despite the increase in the price target, Mizuho has chosen to maintain a Neutral rating on Hess shares.

The report also notes that the standalone Net Asset Value (NAV) for Hess is estimated at $165 per share. The confidence expressed by both Chevron and Hess regarding the closure of the acquisition post-arbitration is a significant factor in the updated financial model. The arbitration with Exxon Mobil is a critical event that could influence the finalization of the acquisition, with both parties awaiting its outcome.

The update by Mizuho reflects the latest developments in Hess's financial standing and its strategic maneuvers within the industry. The new price target of $199 is indicative of the changes in Hess's valuation, based on recent earnings, guidance, and the progress of the proposed acquisition by Chevron. Investors and stakeholders in Hess Corp. are thus provided with an updated perspective on the company's financial outlook as it approaches a pivotal moment in its corporate trajectory.

In other recent news, Hess Corp saw a downward revision in its stock price target and future earnings estimates by CFRA due to regulatory risk considerations. The firm's analyst has set the new stock price target at $145.00, down from $150.00, while maintaining a Hold rating on the stock.

Despite the downward revision, Hess Corp reported a third-quarter EPS of $2.14, surpassing the consensus estimate. The company also experienced a significant increase in production, reporting a daily production rate of 461,000 barrels of oil equivalent (boe/d), marking a year-over-year increase of 17%.

In the meantime, Chevron Corporation's acquisition of Hess Corp has been delayed due to a challenge from Exxon. This acquisition is central to Chevron's growth strategy and would provide Chevron with a 30% interest in a high-yield Guyana oilfield. However, Chevron's declining earnings have led to a reshuffle within the company's leadership.

InvestingPro Insights

To complement Mizuho's analysis, recent data from InvestingPro offers additional insights into Hess Corp.'s financial position. The company's market capitalization stands at $44.88 billion, reflecting its significant presence in the energy sector. Hess's P/E ratio of 16.92 suggests a reasonable valuation relative to its earnings, especially when considering its PEG ratio of 0.21, which indicates that the stock may be undervalued given its growth prospects.

InvestingPro Tips highlight Hess's financial stability and growth potential. The company has maintained dividend payments for 38 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the cyclical nature of the energy industry. Additionally, Hess operates with a moderate level of debt, which provides financial flexibility as it navigates the pending acquisition by Chevron.

The company's revenue growth of 21.35% over the last twelve months and a strong EBITDA growth of 36.29% align with Mizuho's positive outlook. These figures support the analysts' decision to raise the price target, reflecting Hess's improving financial performance.

For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Hess Corp., providing a deeper understanding of the company's market position and potential.

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