On Monday, Citi reaffirmed its Neutral rating on Plains GP Holdings, L.P. (NASDAQ: NASDAQ:PAGP) with a steady price target of $18.00. The firm's analysis suggests that Plains All American Pipeline's (PAA) EBITDA may surpass the average Wall Street estimate, potentially leading to stronger than anticipated results for the upcoming quarter.
According to the firm, several factors could serve as tailwinds for the company's Crude segment, including recent mergers and acquisitions, the Plains LPG Advantage (PLA) benefits, the absence of winter weather disruptions, and sustainable cost savings from the first quarter of 2024. These elements may contribute to a robust performance that exceeds current expectations.
In the Natural Gas Liquids (NGL) segment, the firm notes that frac spreads have been higher than PAA’s hedges, which could mitigate the typical seasonal decline in EBITDA. This could result in a less pronounced drop compared to previous years.
Looking ahead to the full year 2024 guidance, the firm anticipates that PAA might aim towards the upper end of its current EBITDA forecast range of $2.625 to $2.725 billion. There is also a possibility that the company could slightly raise the guidance range if the upcoming results exceed expectations. However, the firm does not foresee any adjustments to PAA’s capital expenditure guidance for growth, which is estimated to be around $375 million for the year.
In other recent news, Plains All American has been making noteworthy strides in its financial performance and strategic developments. The energy infrastructure provider reported strong first-quarter results with an adjusted EBITDA of $718 million, surpassing both RBC Capital's and consensus estimates. The company also confirmed its financial guidance for the year 2024, maintaining its outlook for adjusted EBITDA.
RBC Capital Markets responded to these developments by adjusting its price target for Plains All American shares, increasing it to $18 from the previous $17, while maintaining a Sector Perform rating. The firm's revised price target is influenced by Plains All American's progress in re-contracting efforts, which are expected to address concerns regarding cash flows within the crude oil segment for the year 2026.
These recent developments also include Plains All American's strategic acquisitions, such as an additional 10% in Saddlehorn Pipeline Company and Mid-Con terminal asset for $110 million. The company also reported increased contract volumes in its Permian long-haul portfolio. These results and strategic maneuvers reflect Plains All American's commitment to capital discipline, robust free cash flow generation, and consistent returns to investors.
InvestingPro Insights
InvestingPro data highlights Plains All American Pipeline's (PAA) financial metrics and market performance as of the first quarter of 2024. With a market capitalization of $12.63 billion and a Price/Earnings (P/E) ratio of 15.71, the company's valuation reflects its earnings power. The PEG ratio, which stands at -0.68, suggests that the company's earnings growth might not be keeping pace with its P/E ratio. However, the robust dividend yield of 7.11% could be a compelling factor for income-focused investors, especially considering the significant dividend growth of 18.69% over the last twelve months.
Despite a decline in revenue growth by -13.62% in the last twelve months, the company has maintained a Gross Profit Margin of 5.82%. Shareholders have seen a strong 1-year price total return of 36.33%, indicating positive investor sentiment. Additionally, the price is currently at 94.75% of its 52-week high, with the previous close at $17.86, closely aligning with Citi's price target of $18.00.
InvestingPro Tips suggest that investors should consider the company's ability to maintain dividend payouts and the potential for capital appreciation as indicated by the recent price performance. For those looking to delve deeper into Plains All American Pipeline's investment potential, InvestingPro provides additional insights and tips. There are currently 5 more tips available on InvestingPro for investors who are considering PAA as part of their portfolio. To access these valuable insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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