On Tuesday, Goldman Sachs maintained a Sell rating on shares of Plains All American (NASDAQ:PAA) with a steady price target of $17.00. The firm's analysis comes as the market anticipates the company's third-quarter 2024 earnings.
The focal points for the upcoming earnings report include comparison of activity between the Midland and Delaware regions, considering the existing gas infrastructure limitations, expectations versus actual growth in the Permian Basin, and the potential for operational efficiencies moving forward. Additionally, the scale of bolt-on opportunities will likely draw attention.
For the third quarter of 2024, Goldman Sachs forecasts an EBITDA of $665 million for Plains All American, aligning with its previous estimate. This figure is slightly higher than the consensus estimate of $653 million. The predicted EBITDA reflects an increase in the Crude and Other segment balanced by a minor decline in the NGL segment.
The quarter-over-quarter variation is attributed to a reduction in crude marketing gains compared to the second quarter of 2024, a decrease in the positive impact from iso-to-normal butane spreads in NGLs, and deferred operating costs projected for the second half of 2024. These factors are somewhat compensated by robust growth in the Permian region, especially in long-haul transportation.
Looking at the full year 2024, Goldman Sachs estimates an EBITDA of $2,780 million for Plains All American, which is marginally above the market consensus of $2,766 million. The valuation of the company, according to Goldman Sachs, supports the maintained price target of $17 for both PAA and its affiliated entity, Plains GP Holdings (NASDAQ:PAGP), with the Sell rating unchanged. The firm's stance on the stock remains cautious ahead of the third-quarter earnings release.
In other recent news, Plains All American Pipeline has made strategic amendments to its credit agreements, extending the maturity dates of its existing credit facilities. This move is part of the company's proactive approach to managing its financial obligations. The company has also reported robust Q2 performance in 2024, with an adjusted EBITDA of $674 million, surpassing expectations. As a result, it has increased its full-year 2024 EBITDA guidance by $75 million.
In parallel, Plains GP Holdings, a related entity, has entered a promising joint venture with Oryx. This strategic partnership is anticipated to secure additional barrels for the company's long haul pipelines in the future. Stifel has consequently upgraded the price target for Plains GP Holdings to $23.00, maintaining a Buy rating.
These recent developments reflect the companies' strategic financial planning and their efforts to align with changing market conditions. They also underscore the companies' focus on enhancing their capacity to manage increased transportation demands.
InvestingPro Insights
Plains All American's financial metrics and market performance offer additional context to Goldman Sachs' analysis. The company's market capitalization stands at $12.39 billion, with a P/E ratio of 16.01, suggesting a moderate valuation relative to earnings. Notably, PAA's dividend yield is an attractive 7.19%, with a significant dividend growth of 18.69% over the last twelve months as of Q2 2024, which could be of interest to income-focused investors.
InvestingPro Tips highlight that PAA has raised its dividend for 3 consecutive years, aligning with the company's strong dividend growth. Additionally, the company's high return on invested capital suggests efficient use of funds to generate profits. These insights complement Goldman Sachs' analysis by providing a broader perspective on PAA's financial health and shareholder value proposition.
InvestingPro offers 13 additional tips for PAA, providing investors with a comprehensive view of the company's strengths and potential risks. To gain access to these valuable insights and make more informed investment decisions, consider exploring the full range of tips available on InvestingPro.
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