On Tuesday, Goldman Sachs maintained its Sell rating on Plains GP Holdings, L.P. (NASDAQ: NASDAQ:PAGP) with a consistent price target of $17.00. The firm's analysis was presented in anticipation of the company's third-quarter earnings for 2024, focusing on key areas such as activity in the Midland versus Delaware regions, expectations on Permian growth and efficiencies, and the potential for bolt-on opportunities.
The company's expected EBITDA for the third quarter is projected at $665 million, matching Goldman Sachs' previous estimates and slightly above the consensus of $653 million. This forecast accounts for a balance of factors, including a reduction in crude marketing gains from the second quarter, narrowed iso-to-normal butane spreads in natural gas liquids (NGLs), and postponed operating costs into the second half of the year. However, these are anticipated to be offset by robust growth in the Permian, particularly in long-haul transportation.
For the full year 2024, Goldman Sachs estimates Plains GP Holdings' EBITDA at $2,780 million, which is marginally higher than the consensus estimate of $2,766 million. Despite these figures, the valuation assessment by Goldman Sachs leads to the continuation of the $17 price target for both Plains All American (PAA) and PAGP, with a Sell rating sustained for both entities.
The firm's analysis indicates that the third quarter's performance will likely be influenced by various sequential drivers. These include not only the aforementioned factors affecting the third quarter but also the anticipation of stronger growth in the Permian region, which is a critical component of the company's operations.
InvestingPro Insights
To complement Goldman Sachs' analysis of Plains GP Holdings, L.P. (PAGP), recent data from InvestingPro offers additional perspective on the company's financial position. Despite Goldman's Sell rating, PAGP has shown impressive price performance, with a 104.35% total return over the past year and an 80.77% return year-to-date. This strong performance has brought the stock price to 100% of its 52-week high, suggesting significant investor confidence.
However, the company's financials present a mixed picture. While PAGP boasts a relatively low P/E ratio of 8.08, indicating potential undervaluation, its adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 10.78. This discrepancy may reflect adjustments for non-recurring items or changes in the company's earnings outlook.
InvestingPro Tips highlight that PAGP's earnings per share have shown positive growth over the past year, which aligns with the stock's strong price performance. Additionally, the company's return on assets is notably high at 126.1%, suggesting efficient use of its asset base.
For investors seeking a deeper understanding of PAGP's financial health and growth prospects, InvestingPro offers 13 additional tips that could provide valuable insights into the company's investment potential.
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