On Monday, Mizuho Securities reinstated coverage on Kinetik Holdings Inc. (NYSE:KNTK) with an Outperform rating and a new price target of $47.00. The firm's outlook on Kinetik is positive following the company's recent strategic transactions, which are expected to streamline its business operations, accelerate debt reduction, and enhance its presence in the Northern Delaware region.
These strategic moves are anticipated to help Kinetik achieve its leverage goal of approximately 3.5 times by the end of 2025 and establish a path to a run-rate EBITDA of around $1 billion per year. The acquisition of Durango is particularly notable for giving Kinetik more control over undedicated upstream natural gas liquids (NGL) barrels, positioning it favorably in a sector experiencing significant consolidation.
The Durango deal is also seen as a means to refine Kinetik's strategic focus in the Northern Delaware area. The firm believes that Kinetik stands to gain from higher unit margins through additional services required to process produced gas to meet specifications, such as treating and blending.
Mizuho's revised estimates reflect these developments, leading to the establishment of the $47 price target for Kinetik Holdings' stock. The transactions are viewed as a strong enhancement to Kinetik's investment profile in the eyes of the firm.
In other recent news, Kinetik Holdings has reported a promising start to 2024, with first-quarter earnings surpassing internal budgets, indicating a 25% increase in adjusted EBITDA to $234 million. This growth is largely due to a 13% year-over-year increase in processed gas volumes and strategic expansions in the energy sector.
Scotiabank has maintained its Sector Outperform rating on Kinetik Holdings, increasing the shares target to $48.00 from the previous $42.00, following recent meetings with Kinetik's management and investors. The revised forecast by Scotiabank includes a bump in the FY24 EBITDA estimate for Kinetik Holdings to $980 million, up from the previous $951 million.
Additionally, the firm's projections for 2025 and 2026 EBITDA have been raised to $1.12 billion and $1.23 billion respectively. Citi has maintained a neutral rating on Kinetik Holdings with a steady price target of $42.00, expecting the firm to update its 2024 EBITDA and capital expenditure guidance alongside its earnings report. Wells Fargo has adjusted the company's stock price target to $40.00 from the previous $37.00, acknowledging Kinetik's operational improvements and efficiencies.
InvestingPro Insights
The recent positive assessment by Mizuho Securities is bolstered by key financial metrics and market performance indicators for Kinetik Holdings Inc. (NYSE:KNTK). InvestingPro data highlights that Kinetik has a market capitalization of $2.52 billion and a robust revenue growth of 21.48% in Q1 2024, showcasing the company's expanding operations. Additionally, with a price-to-earnings (P/E) ratio of 8.48 for the last twelve months as of Q1 2024, Kinetik presents an attractive valuation compared to industry peers.
InvestingPro Tips suggest that Kinetik is a company that pays a significant dividend to shareholders, with a yield of 7.11%, and has experienced a large price uptick of 29.0% over the last six months, reflecting strong investor confidence. Furthermore, analysts predict the company will be profitable this year, which aligns with the firm's positive outlook and strategic initiatives.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on Kinetik Holdings. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to exclusive insights that could further inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.