On Thursday, Mizuho Securities expressed a positive stance on Plains All American (NASDAQ:PAA), lifting the stock's price target to $21 from the previous $19 while retaining an Outperform rating. The firm anticipates that Plains All American may announce an increase in its 2024 guidance following a robust first-quarter performance this year. The expected guidance raise is likely to be disclosed in the upcoming second-quarter update scheduled for August 2, 2024, before the market opens.
The optimism from Mizuho is driven by a series of beneficial factors that are predicted to impact Plains All American positively. These include contributions from recent acquisitions, a surge in crude oil prices, favorable natural gas liquids (NGL) fractionation spreads, and record spreads between isobutane and butane. These elements are expected to combine and create a favorable environment for the company's financial update.
Mizuho also highlighted the company's performance relative to the American Midstream Energy Index (AMEI), with Plains All American and its affiliate, Plains GP Holdings (NASDAQ:PAGP), outperforming the index year-to-date, showing gains of 30.2% and 29.4% respectively, against the AMEI's 22.8% increase.
The removal of a major investment concern, which pertained to long-haul contract renewals, was noted in Plains All American's first-quarter update, shifting investor attention towards the company's long-term growth potential in the Permian Basin and its ability to consolidate its presence and generate attractive returns.
The firm's analysis also pointed out the projected free cash flow yield for 2026, which, although not as exceptionally high as in recent years, is still considered attractive at approximately 13%. Furthermore, Plains All American's balance sheet was mentioned as a standout when compared to its industry peers.
The upward revision in the price target to $21 is attributed to higher earnings estimates and an expansion in the stock's valuation multiples.
In other recent news, Plains All American Pipeline, L.P. (PAA) delivered strong first-quarter results, reporting an adjusted EBITDA of $718 million, surpassing both RBC Capital's and consensus estimates. The company also confirmed its adjusted EBITDA outlook for 2024.
RBC Capital Markets responded by adjusting its price target for Plains All American shares from $17 to $18, maintaining a Sector Perform rating. The revised price target is influenced by progress in re-contracting efforts expected to address concerns regarding cash flows within the crude oil segment for 2026.
Citi also reaffirmed its Neutral rating on Plains GP Holdings, L.P. with a steady price target of $18.00. Citi's analysis suggests that Plains All American Pipeline's EBITDA may surpass the average Wall Street estimate, potentially leading to stronger than anticipated results for the upcoming quarter.
Several factors could serve as tailwinds for the company's Crude segment, including recent mergers and acquisitions, the Plains LPG Advantage benefits, the absence of winter weather disruptions, and sustainable cost savings from the first quarter of 2024.
In addition to its financial performance, Plains All American has been making strategic developments, including acquiring an additional 10% in Saddlehorn Pipeline Company and Mid-Con terminal asset for $110 million, and reporting increased contract volumes in its Permian long-haul portfolio.
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