On Friday, JPMorgan adjusted its stance on Hess Midstream Partners LP (NYSE:HESM), downgrading the stock from Overweight to Neutral, while increasing the price target to $27 from $25.
The revision followed Hess (NYSE:HES) Midstream's recent performance, which, despite falling slightly short of fourth-quarter expectations, saw the company forecast stronger-than-anticipated earnings for 2024. Hess Midstream's guidance suggests an approximate 12.5% year-over-year growth in EBITDA, reaching around $1,150 million at the midpoint.
The company also revealed plans for an increase in minimum volume commitments (MVCs) for gas and oil in 2025 and 2026. These commitments are expected to drive annualized growth in gas throughput volumes by 10% and crude throughput volumes by 10% in 2025 and 5% in 2026. Such growth supports an anticipated EBITDA increase of 10% for both 2025 and 2026, surpassing expectations for the three-year period.
Despite these positive developments, JPMorgan indicated that the potential for future EBITDA growth, along with share repurchase agreements and dividend hikes, appear to be already reflected in Hess Midstream's current valuation. The firm noted that the company has raised its return of capital program to more than $1.25 billion through 2026 and extended its dividend growth by 5% through the same period.
Hess Midstream has shown notable stock price performance, with a year-to-date increase of 7% and a 16% rise over the last twelve months, outpacing the AMNA index. Following the consideration of these results, JPMorgan has set a year-end 2024 price target of $37 for Hess Midstream. However, due to the stock's recent outperformance, the firm now sees a more balanced risk/reward profile, leading to the neutral rating.
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