On Thursday, EQT Corp. (NYSE:EQT (ST:EQTAB)) stock experienced a shift in rating as Piper Sandler adjusted its stance from Overweight to Neutral, accompanied by a decrease in the price target to $32.00 from the previous $43.00. The move reflects a change in the long-term natural gas price assumption, now set at $3.25, down from $4.00.
EQT recently reported a strong second quarter of 2024, surpassing expectations due to increased volumes and pricing. However, the company's guidance for the second half of 2024 includes capital expenditures of approximately $1.3 billion, which is about $115 million higher than consensus expectations. This discrepancy is attributed to costs not fully accounted for related to the early close of an agreement with ETRN.
For the second half of 2024, EQT forecasts production volumes of 1.075 trillion cubic feet equivalent (Tcfe), taking into account planned curtailments of 90 billion cubic feet equivalent (bcfe), which is roughly 4% below consensus estimates.
Looking forward to the fiscal year 2025, the company anticipates capital expenditures ranging from $2.3 to $2.6 billion, with consensus figures slightly below the midpoint. These investments are expected to yield free cash flow (FCF) in the same range, assuming a natural gas price of $3.50.
EQT remains positive about the benefits of integrating ETRN, particularly in terms of synergies and compression projects that are projected to enhance base production performance. The company's debt leverage is forecasted to decrease from 3.0 times at the end of 2024 to 2.2 times at the end of 2025, prior to the sale of non-core assets.
EQT projects asset sales to bring in $3 to $5 billion, aiming to reduce its debt to around $8 billion by the end of 2025, down from $14 billion in the third quarter of 2024.
In fiscal year 2025, EQT is expected to generate approximately $1.7 billion in free cash flow, equating to a 7.1% free cash flow to enterprise value (FCF/EV) yield at a natural gas price of $3 per million British thermal units (MMBtu). At the current price strip, this figure could increase to $2.1 billion, resulting in an 8.4% FCF/EV yield.
This performance is considered robust within Piper Sandler's coverage of gas stocks, with the exception of one competitor, which stands at a 10.0% FCF/EV yield at strip pricing.
In other recent news, EQT Corp has been the focus of several key developments. Wells Fargo has upgraded EQT Corp's stock from Equal Weight to Overweight following the successful merger with ETRN and the company's strong quarterly performance. The merger and improved financials have led to a revised higher estimated net asset value (NAV) and a raised price target.
In response to falling natural gas prices, EQT Corp, along with other major U.S. natural gas producers, has planned strategic curtailments of approximately 90 billion cubic feet equivalent this fall. This decision is contingent on market conditions and aims to address the near 40% price drop over recent months.
Piper Sandler has maintained an Overweight rating for EQT Corp, despite adjusting its price target. This decision follows the company's second-quarter 2024 results and its full-year 2024 guidance. EQT Corp has projected capital expenditures of approximately $1.3 billion for the second half of 2024, primarily due to the earlier-than-anticipated closure of the ETRN acquisition.
During its Second Quarter 2024 Results Conference Call, EQT Corp reported significant strategic developments and financial results, including the completion of the Equitrans Midstream (NYSE:ETRN) acquisition and the Mountain Valley Pipeline. The company is actively pursuing a minority equity sale of Equitrans' regulated assets and marketing its non-operated assets in Northeast Pennsylvania, aiming to reduce long-term debt.
InvestingPro Insights
In light of EQT Corp.'s recent market performance and Piper Sandler's rating adjustment, insights from InvestingPro provide additional context for investors. Notably, analysts have revised their earnings upwards for EQT, signaling potential confidence in the company's financial prospects. This aligns with the company's own positive outlook on integrating ETRN and anticipated free cash flow generation. Additionally, EQT's stock has been identified as trading with low price volatility, which could appeal to investors seeking stability in their portfolio.
From a financial data perspective, EQT's market capitalization stands at $18.7 billion, with a P/E ratio of 18.99. While the company's revenue saw a significant decline over the last twelve months as of Q2 2024, by -49.94%, it's worth noting that EQT has been profitable over the last twelve months and analysts predict it will remain profitable this year. The company's dividend yield is currently at 2.0%, showcasing its commitment to returning value to shareholders.
For those looking to delve deeper into EQT's performance and future prospects, there are additional InvestingPro Tips available, providing a comprehensive analysis of the company's financial health and market position. Visit https://www.investing.com/pro/EQT for more exclusive insights.
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