On Tuesday, Goldman Sachs adjusted its price target for Kinetik Holdings, Inc. (NYSE:KNTK), reducing it to $45 from the previous $46, while still endorsing the stock with a Buy rating. The revision follows Kinetik's second-quarter results for 2024, which aligned with estimates and consensus, with a noted outperformance in Pipelines compensating for a minor shortfall in Midstream Logistics. The latter was impacted by higher than anticipated shut-in volumes at Alpine High.
The firm has revised its EBITDA (earnings before interest, taxes, depreciation, and amortization) forecast for Kinetik Holdings for the year 2024, now expecting it to be between $940 million and $980 million. This updated guidance includes contributions from the recent Durango acquisition and accounts for the divestiture of the remaining interest in the GCX project during the quarter.
The analyst firm highlighted management's positive outlook on growth prospects in New Mexico, where Kinetik continues to secure new commercial agreements, which supports the potential for double-digit EBITDA growth through 2027.
However, this anticipated growth is contingent upon increased capital expenditures. The company has raised its capex guidance for 2024, and the analyst's remarks suggest that 2025 may also see higher than previously expected capital spending. This increase in capex is projected to slightly diminish the near-term free cash flow (FCF) outlook for Kinetik Holdings.
Despite these adjustments, the analyst firm's estimates for Kinetik's EBITDA have been modestly increased by 1% for the years 2024 to 2027, compared to previous predictions and consensus figures. The slight decrease in the free cash flow forecast has led to the adjustment of the price target to $45. Nevertheless, the firm's stance on Kinetik Holdings remains positive, with a continued Buy rating on the stock.
In other recent news, Kinetik Energy Inc. reported a fruitful second quarter with a 13% year-over-year increase in adjusted EBITDA, reaching over $234 million. The company also generated $163 million in distributable cash flow and $105 million in free cash flow. The company revised its 2024 adjusted EBITDA guidance upwards to $940 million to $980 million, with capital expenditures projected to be $260 million to $300 million for the year.
Kinetik's President and CEO, Jamie Welch, highlighted the successful integration of the Durango acquisition and its positive impact on the company's diversification. The company is focusing on high-return opportunities, with significant growth potential identified in New Mexico, particularly with the Kings Landing II project.
InvestingPro Insights
As Goldman Sachs updates its outlook on Kinetik Holdings, Inc. (NYSE:KNTK), real-time data from InvestingPro provides additional context for investors. Kinetik Holdings is currently trading at an attractive P/E ratio of 7.86—suggesting that the stock may be undervalued relative to its near-term earnings growth potential. This is further evidenced by a PEG ratio of just 0.12 over the last twelve months as of Q2 2024, indicating that the company's earnings growth could outpace its P/E ratio significantly.
For income-focused investors, Kinetik is notable for its significant dividend yield, which stands at 7.34% as of the latest data. This commitment to returning value to shareholders is bolstered by the company's strong revenue growth, which has been reported at 15.2% over the last twelve months as of Q2 2024. Moreover, Kinetik has demonstrated a robust price uptick of 34.28% over the last six months, reflecting positive market sentiment.
InvestingPro Tips also highlight that while Kinetik's short-term obligations exceed its liquid assets, indicating potential liquidity risks, the company has been profitable over the last twelve months. Analysts predict continued profitability this year, which may reassure investors considering the company's increased capital expenditures.
Investors seeking additional insights can find many more InvestingPro Tips on Kinetik Holdings by visiting https://www.investing.com/pro/KNTK, which may further inform investment decisions in the context of the company's current financial performance and market valuation.
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