Citi reiterates Buy rating on Hess Midstream stock with $42 price target
Investing.com
Published Jul 14, 2025 06:37AM ET
Investing.com - Citi maintained its Buy rating and $42.00 price target on Hess Midstream Partners LP (NYSE:HESM) ahead of the company's second-quarter 2025 earnings report, scheduled for July 23. According to InvestingPro data, the stock appears slightly undervalued based on its Fair Value analysis, with analysts' targets ranging from $41 to $48.
The investment bank estimates second-quarter 2025 adjusted EBITDA of $306 million, aligning with Hess (NYSE:HES) Midstream's guidance midpoint of $305 million. This projection builds on the company's strong financial performance, with last twelve months EBITDA reaching $1.14 billion. Citi expects sequential growth to be driven by increased volumes following the winter weather impacts experienced in the first quarter of 2025.
On capital allocation, Citi anticipates a roughly 4% quarter-over-quarter dividend increase, larger than recent increases due to the outsized $200 million second-quarter buyback. InvestingPro data shows the company has maintained dividend payments for 9 consecutive years, with a current yield of 7.39% and an 11.9% dividend growth over the last twelve months. The exit of Global Infrastructure Partners (GIP) from the stock will likely be a focus this quarter, with buybacks now more reliant on repurchasing shares in the open market rather than directly from sponsors.
Citi noted it will be monitoring commentary around the expected addition of another independent director, which is not expected to happen prior to the close of the Chevron/Hess arbitration.
The bank highlighted recent governance updates that now require certain key board decisions to be approved by at least one independent director, though Citi does not anticipate any change to the capital allocation strategy.
In other recent news, Hess Midstream LP reported its Q1 2025 earnings, showing an earnings per share (EPS) of $0.65, which exceeded analyst forecasts of $0.63. However, revenue for the quarter came in at $382 million, slightly missing the expected $384.46 million. The company has also announced a public offering of 15,022,517 Class A shares, with J.P. Morgan and Citigroup (NYSE:C) as joint bookrunning managers, though it will not receive any proceeds from this sale. Additionally, Hess Midstream has initiated a $200 million share repurchase plan, including a $190 million buyback of Class B units from its sponsors and a $10 million accelerated share repurchase of Class A shares from the public. UBS has reiterated its Buy rating for Hess Midstream, maintaining a price target of $45, and adjusted its Q2 2025 EBITDA estimate slightly upward to $308 million. The firm projects full-year 2025 EBITDA of $1,260 million, which aligns closely with the company's guidance range. These developments reflect the company's strategic focus on shareholder returns and operational stability.
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Written By: Investing.com
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