On Friday, Mizuho Securities sustained its positive stance on Western Gas Partners (NYSE:WES), maintaining an Outperform rating and a price target of $45.00. The firm's outlook is buoyed by recent commercial agreements disclosed in Western Gas's second-quarter update for 2024, which are expected to enhance growth prospects, particularly in the DJ/Uinta regions previously considered lower growth areas.
The reaffirmed capital expenditure forecast for the fiscal year 2024 remains steady at $700-850 million, with an anticipation of lower year-over-year spending in fiscal year 2025. These agreements are projected to have a more significant impact on the company's financials in fiscal years 2025 and 2026. However, for the current fiscal year 2024, Western Gas is targeting the upper end of its adjusted EBITDA guidance, which ranges between $2.2 billion and $2.4 billion.
Mizuho also noted the potential for discussions in the third quarter regarding the strong organic growth experienced by Western Gas in fiscal year 2024 and how it might influence cost-of-service rate determinations in the following year. Despite this, the firm remains confident in Western Gas's growth trajectory, particularly in the Delaware Basin, as well as the company's balance sheet, cash flow, and potential for returning capital to shareholders.
The analyst's commentary highlights the strategic benefit of utilizing existing operational leverage through the new commercial agreements, which could add to the company's growth without necessitating an increase in capital expenditures. Additionally, Mizuho appreciates the diversification of growth prospects beyond Western Gas's core Permian operations.
In other recent news, Western Gas Partners has seen a flurry of activity. Morgan Stanley downgraded the company's stock from Overweight to Equalweight, citing a shift in valuation after a significant year-to-date performance. Concurrently, the firm's parent company, Occidental Petroleum (NYSE:OXY), sold 19.5 million common units to reduce debt and divest assets, leaving it with 43.5% ownership of Western Gas's total issued units.
RBC Capital Markets, on the other hand, increased its price target for Western Gas to $38, up from $36, following a steady second-quarter financial report and reaffirmed guidance for the full year. Western Gas also secured new business contracts in the Delaware and Uinta Basins, contributing to this positive adjustment.
Financially, Western Midstream Partners (NYSE:WES) priced an $800 million senior notes offering at 5.45% due 2034, intending to use the proceeds for repaying existing debt and general partnership needs. The company also reported strong Q2 2024 results, with a net income of $370 million and adjusted EBITDA of $578 million.
Looking ahead, Western Midstream anticipates record operated throughput, adjusted EBITDA, and free cash flow for the year, and plans a decrease in capital expenditure in 2025. These are the recent developments for Western Gas Partners.
InvestingPro Insights
Western Gas Partners (NYSE:WES) has been recognized by InvestingPro for its robust financial health and promising investment metrics. With a perfect Piotroski Score of 9, the company demonstrates strong fiscal stability and operational efficiency. Moreover, the company's stock is currently trading at a low P/E ratio of 9.81, indicating a potentially undervalued position in relation to its near-term earnings growth. This data is particularly relevant given Mizuho Securities' optimistic outlook and the strategic commercial agreements poised to bolster Western Gas's growth prospects.
Investors may also be interested in the company's commitment to shareholder returns, as evidenced by its significant dividend yield of 9.23% and a consistent history of dividend payments over the past 12 years. The InvestingPro platform lists several additional tips, including the fact that three analysts have recently revised their earnings estimates upwards for Western Gas, reflecting growing confidence in the company's financial performance.
For those seeking more detailed investment analysis and tips, InvestingPro offers a comprehensive list of insights, with additional tips available on the platform. As Western Gas continues to navigate its growth trajectory, these metrics and insights can help investors make informed decisions.
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