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On Thursday, Stifel analysts adjusted their outlook on Western Gas Partners (NYSE:WES), increasing the price target to $41 from $40, while retaining a Hold rating on the stock. The revision follows the company’s fourth-quarter results for the year 2024, which aligned with Stifel’s projections. The company, currently trading at an attractive P/E ratio of 10.2x, has demonstrated strong performance with a 28.6% return over the past year.
Western Gas announced significant new water midstream projects, expected to require a capital investment between $400 million and $450 million over the next two years. The initiatives are seen as a strategic move to address water management issues in the Delaware region, providing a potential avenue for growth. According to InvestingPro analysis, the company maintains a healthy financial position with a "GOOD" overall health score, suggesting capacity for this substantial investment.
Stifel’s analysts noted that these water projects could open up additional revenue streams for Western Gas in the future. The company’s investment in water midstream services, along with ongoing growth in the Permian and Powder River Basin (PRB), indicates that capital expenditure might be higher in the coming years. Western Gas anticipates that its 2026 capital expenditures will exceed those of 2025.
Despite the prospect of increased capital spending, management at Western Gas expects to maintain low leverage and achieve modest growth in its distribution. The company currently offers an attractive 8.8% dividend yield and has maintained dividend payments for 13 consecutive years, as noted by InvestingPro. Stifel’s updated price target of $41 reflects these developments, with expectations set against the company’s 2026 financial outlook. Based on InvestingPro’s Fair Value analysis, the stock appears slightly undervalued at current levels.
In other recent news, Western Midstream Partners reported fourth-quarter 2024 earnings that fell short of analyst expectations. The company posted adjusted earnings per unit of $0.85, missing the consensus forecast of $0.87. Revenue for the quarter was $858.9 million, which was below Wall Street’s expectation of $926.84 million. Despite the quarterly miss, Western Midstream’s full-year 2024 adjusted EBITDA was $2.34 billion, aligning with its guidance range of $2.2-$2.4 billion. The company also generated free cash flow of $1.32 billion, surpassing the high end of its guidance range of $1.05-$1.25 billion. Western Midstream achieved record annual natural gas throughput of 5.1 billion cubic feet per day, marking a 16% increase year-over-year when adjusted for asset sales. Additionally, crude oil and NGLs throughput averaged 530,000 barrels per day, reflecting a 12% increase when accounting for divested assets. The company maintained its quarterly distribution of $0.875 per unit and is targeting mid-to-low single-digit annual distribution growth for 2025.
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