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91.7% of Analysts Rate EQT Midstream Partners a ‘Buy’

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EQT Midstream’s 2016 financial and CAPEX guidance

EQT Midstream Partners (EQM) announced its 2016 financial and CAPEX guidance on December 7, 2015. According to the press release, EQT Midstream’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) “is expected to be $530 – $550 million and distributable cash flow is expected to be $460 – $480 million.”

As midstream energy behemoth Kinder Morgan (KMI) slashes its dividends by 75%, EQT Midstream expects its distributions to grow by 21% in 2016 versus 2015. Plus, it reiterated the 20% per unit distribution growth target in 2017. However, we cannot make an apples-to-apples comparison between Kinder Morgan and EQT Midstream due to the huge difference in their sizes. EQT Midstream expects its 2016 growth CAPEX to be ~$715–$755 million. We’ll discuss this further in a later part of this series.

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EQT Corporation’s Utica well results

EQT Midstream’s sponsor, EQT Corporation (EQT), and other producers have found some interesting well results in the deep Utica region. As of September 30, 2015, EQT’s Scotts Run well reported the highest 24-hour initial production of Utica wells. The demand for incremental infrastructure will increase with successful Utica development.

Randy Crawford, EQT Midstream’s COO (chief operating officer), highlighted in the 3Q15 earnings conference call that “Deep Utica could result in another tremendous opportunity for EQM. On the gathering side, we believe new infrastructure will be required to support a Utica development plan, due to the exceptionally high pressures at which these wells produce.”

Analysts’ targets for EQM

At a broader level, ~91.7% of analysts rate EQT Midstream Partners a “buy” and the remaining ~8.3% rate it a “sell.” The median target price of $102 for EQM implies a ~51.6% price return in the next 12 months from its December 10, 2015, closing price of $67.30. EQM is among JPMorgan Chase’s (JPM) list of top defensive, high-quality energy stocks.

EQT Midstream’s peers Western Gas Partners (WES), Antero Midstream Partners (AM), and Rice Midstream Partners (RMP) have “buy” ratings from 93.8%, 75.0%, and 83.3% of analysts, respectively. EQM forms ~1.1% of the First Trust North American Energy Infrastructure ETF (EMLP).

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