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EQT Midstream Partners Posted 20.0% Earnings Growth in 2017

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Feb. 27 2018, Updated 1:30 p.m. ET

4Q17 and 2017 earnings

So far in this series, we’ve looked at the 4Q17 operating performances and guidances of five MLPs, including Spectra Energy Partners (SEP), Andeavor Logistics (ANDX), Western Gas Partners (WES), Enable Midstream Partners (ENBL), and EnLink Midstream Partners (ENLK).

In this article, we’ll look into the operating performance of EQT Midstream Partners (EQM), the MLP formed by EQT Corporation (EQT) to provide natural gas gathering, compression, and transportation services in the Appalachian Basin.

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EQT Midstream Partners posted a strong 18.0% YoY (year-over-year) rise in its EBITDA (earnings before interest, tax, depreciation, and amortization) during the most recent quarter. However, the partnership still missed its 4Q17 EBITDA estimate by 2.0%. Higher firm-contracted revenues mainly drove the partnership’s strong 4Q17 performance. Under firm contracts, a fixed monthly fee is charged for the reservation of pipeline capacity regardless of pipeline usage. For the whole of 2017, EQM’s adjusted EBITDA rose 20.4%.

4Q17 distribution

EQT Midstream Partners declared a distribution of $1.03 per unit in 4Q17, a 21.0% rise compared to 4Q16 and a 5.0% sequential rise. Based on its recent distributions, EQM is trading at a distribution yield of 6.6%. The partnership maintained impressive distribution coverage during 2017 despite its strong distribution growth. EQM’s distribution coverage stood at 1.34x in 2017.

EQT Corporation recently announced the spin-off of its midstream business into a new entity. This will include EQT’s retained midstream assets, EQM’s existing assets, and Rice Midstream Partners’ (RMP) midstream assets. The new entity will likely announce its guidance for 2018 following the completion of the merger. For details on the spin-off transaction, read EQT to Spin Off Its Midstream Operations.

Analysts’ recommendations

A total of 66.6% of analysts have rated EQM as a “buy,” and the remaining 33.3% have rated it as a “hold.” EQM is currently trading significantly below the low range ($70) of analysts’ target price. EQM’s average target price of $84.1 implies a 36% upside potential from its current price level.

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