On Tuesday, Scotiabank maintained its Sector Outperform rating on Kinetik Holdings, Inc. (NYSE:KNTK) stock and increased the shares target to $48.00 from the previous $42.00.
The adjustment follows recent meetings with KNTK's management and investors, where discussions covered a range of topics including the growth pace in the Permian region and specifics about the Durango acquisition that was completed on June 24.
Scotiabank's analyst highlighted a positive outlook on the company's volume trajectory into 2025, spurred by the Durango deal which provides a clearer path to growth on the acquired system as new infrastructure is introduced. The firm's updated projections are based on a more robust growth trajectory than initially estimated.
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, and notably higher than the company's pre-acquisition guidance of $933 million. The analyst anticipates that Kinetik will offer an updated post-transaction guidance during the 2Q earnings report.
Furthermore, Scotiabank's projections for 2025 and 2026 EBITDA have been raised to $1.12 billion and $1.23 billion respectively. The new price target of $48.00 is set at 10 times the firm's revised FY25 EBITDA estimate, aligning with the target valuation for the broader midstream sector. This reflects confidence in Kinetik Holdings' earnings growth and the expected incremental growth following the recent acquisition.
In other recent news, Kinetik Holdings has reported a substantial 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.
On the analyst front, 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.
Simultaneously, 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.
The enhancements include the completion of molecular sieve beds replacement and system-wide amine-treating projects at its processing sites, which have led to improved plant recoveries and efficiencies.
Moreover, Kinetik has seen a resurgence in Alpine High activity, suggesting a positive turn in its production capabilities. Despite market uncertainties, these recent developments reflect Kinetik's focus on strategic growth and sustainability, positioning it for ongoing success in the dynamic energy landscape.
InvestingPro Insights
Following Scotiabank's optimistic update on Kinetik Holdings, Inc. (NYSE:KNTK), real-time data and InvestingPro Tips offer additional context for investors considering the stock. Kinetik's current market capitalization stands at $6.4 billion, with a P/E ratio of 8.37 for the last twelve months as of Q1 2024, indicating a potentially attractive valuation for earnings-focused investors. Revenue growth also appears robust, with a 21.48% increase in the most recent quarter, reflecting the company's successful expansion efforts.
From a shareholder's perspective, Kinetik's significant dividend yield of 7.2% as of the latest data is particularly noteworthy, coupled with the company's stable stock performance, generally trading with low price volatility. While net income is expected to drop this year, the company has been profitable over the last twelve months, and analysts remain confident about its profitability in the current year. Additionally, the stock is trading near its 52-week high, with a price 99.38% of that peak, which could signal market confidence in the company's trajectory.
For those seeking deeper insights, InvestingPro provides further analysis and metrics, including 8 additional InvestingPro Tips for Kinetik Holdings, which can be accessed at https://www.investing.com/pro/KNTK. Interested investors can leverage these insights and take advantage of a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing their investment research with comprehensive data and expert analysis.
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