On Thursday, JPMorgan updated its outlook on EQT Corporation (NYSE:EQT), a natural gas producer, by increasing the price target to $39.00 from the previous $37.00 while maintaining an Overweight rating on the stock. The firm's confidence in EQT's deleveraging strategy following its acquisition of ETRN is cited as a key driver for the stock's potential growth.
The company's assertive deleveraging plan, which is expected to be a pivotal factor for the stock, was highlighted during recent discussions with EQT. The plan is particularly significant after the acquisition of ETRN. JPMorgan anticipates that EQT will successfully complete the sales of its non-operational exploration and production (E&P) assets and regulated midstream assets by the end of the year.
The potential transactions are projected to generate approximately $4.5 billion in cash. This estimate is based on the assumption of around $2.0 billion from upstream asset sales and the monetization of $200 to $300 million in regulated EBITDA. The latter is expected to attract multiples in the 10-12x range or possibly higher. These sales would enable EQT to meet or even exceed the high end of its targeted $3 to $5 billion in asset sales, including the roughly $500 million already secured from an asset swap with Equinor earlier in the year.
JPMorgan expressed greater confidence in the timing of the midstream asset sale. This sentiment is partially due to the nature of potential buyers for the non-operational upstream assets, which are believed to be quasi-government entities. These types of buyers tend to require more time to finalize asset transactions.
In other recent news, EQT Corp has been the focus of several key developments. Analysts at JPMorgan have maintained an Overweight rating on EQT AB (ST:EQTAB), even as they adjusted their earnings per share projections for 2024 and 2026 due to more conservative outlooks from EQT's partners. Despite this, JPMorgan anticipates a significant increase in EQT's profitability from 2025, driven by higher carried interest and the fundraising of new flagship funds.
Meanwhile, Citi resumed coverage of EQT Corp, highlighting expected improvements in the company's cost structure and a potential decrease in capital intensity as key factors for stock recovery. This comes despite the challenges EQT faced following its acquisition of ETRN.
Piper Sandler adjusted its stance on EQT Corp from Overweight to Neutral, reflecting changes in long-term natural gas price assumptions. EQT's guidance for the second half of 2024 includes capital expenditures of approximately $1.3 billion, primarily due to the early close of an agreement with ETRN.
Wells Fargo 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 and a raised price target.
Lastly, 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.
InvestingPro Insights
As EQT Corporation (NYSE:EQT) embarks on its deleveraging journey post-ETRN acquisition, the latest data from InvestingPro shows a market capitalization of $20.84 billion, underscoring the company's significant presence in the natural gas sector. With an adjusted price-to-earnings (P/E) ratio of 34.3 for the last twelve months as of Q2 2024, the stock may be trading at a premium compared to industry peers, which is a testament to the market's optimism about EQT's future profitability, as predicted by analysts.
Investors looking at EQT's financial health will note that the company has a price to book ratio of 1.38, indicating that the stock may be reasonably valued in terms of its net asset value. Furthermore, while the company operates with a moderate level of debt, it's important to consider that short-term obligations exceed liquid assets, which could have implications for the company's short-term liquidity. This is a critical factor for investors to monitor, especially as the company navigates the post-acquisition phase.
For those seeking additional insights, there are 9 more InvestingPro Tips available, which provide a comprehensive analysis of EQT's financial performance, stock volatility, and valuation multiples. These tips can be accessed by visiting InvestingPro, offering valuable guidance for investors considering EQT as part of their portfolio.
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