HES - Hess Midstream started at Buy at UBS on clean return of cash inflection
2023-05-10 12:42:28 ET
Hess Midstream ( NYSE: HESM ) +1.2% in Wednesday's trading as UBS initiated coverage with a Buy rating and $37 price target, as the company transitions from a cost-of-service business model to a clean return of cash story offering peer-leading free cash flow, which supports 5% annual distribution growth and $1B-plus in unit buybacks through 2025.
UBS analyst Brian Reynolds said Hess Midstream ( HESM ) "ticks all the boxes" in seeing a bright outlook for midstream as well positioned: (1) attractive relative free cash flow and dividend yield driving return on capital; growth opportunities in energy transition and security; low leverage vs. prior contraction cycles; inflation protected cash flows; and a relatively low percentage of floating debt.
Reynolds noted Hess Midstream's ( HESM ) investment-grade rated counterparty in Hess ( HES ), which plans to grow production to 200K bbl/day in 2025 from ~170K bbl/day in 2023.
More on Hess Midstream:
- See financial and valuation comparisons to sector peers
- SA analysis: Hess Midstream: When Not A Bargain Is A Good Thing
- Stock price return: Down 3% YTD, roughly flat in the past 12 months
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Hess Midstream started at Buy at UBS on clean return of cash inflection