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EQT Midstream Partners: Most Analysts Rate the Stock a ‘Buy’

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Analyst ratings for EQT Midstream Partners

In this part of our series, we’ll look at Wall Street analysts’ recommendations for EQT Midstream Partners (EQM). At a broader level, ~91.7% of analysts rate EQT Midstream a “buy” and the remaining ~8.3% rate it a “hold.” The median target price of $93 for EQM implies a ~40.9% price return in the next 12 months from its January 25, 2016, closing price of $66. EQM is among JPMorgan’s (JPM) list of the top defensive, high-quality energy stocks.

EQM peers Western Gas Partners (WES), Antero Midstream Partners (AM), and Rice Midstream Partners (RMP) have “buy” ratings from 94.1%, 75.0%, and 91.7% of analysts, respectively. EQM constitutes ~4.48% of the MLP ETF (MLPA).

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Outlook for EQT Midstream

You can consider the following positives and negatives before deciding whether to include EQM in your portfolio.

Positives

  • Minimal direct commodity price exposure: 82% of EQM’s revenues in 3Q15 were tied to firm reservation contracts.
  • Strong growth in EQM’s third-party business: EQM’s third-party revenue has grown at a 62% compound annual growth rate since the company went public in 3Q12. The partnership expects third-party revenues to grow threefold by 2019.
  • The company offered strong distribution growth guidance of 20% through 2017.
  • Drop-down acquisition opportunities from its sponsor, EQT Corporation (EQT): EQT says midstream operations are expected to grow 21% in three years. EQT is expected to spend $125 million–$150 million on its retained midstream assets in 2015. EQM might receive these midstream assets from its sponsor.

Negatives

  • Indirect commodity price exposure: If natural gas prices remain low, producers might be discouraged from producing more. This could negatively impact EQM’s throughput volumes and earnings.
  • The company depends heavily on its sponsor, EQT Corporation (EQT), for throughput volumes.

For more pre-earnings coverage on midstream companies, check out our Master Limited Partnerships page.

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