On Thursday, RBC Capital Markets adjusted its outlook on Kinetik Holdings Inc. (NYSE:KNTK) shares, raising the price target to $46.00 from the previous $43.00, while retaining an Outperform rating on the stock.
The adjustment follows Kinetik's second-quarter earnings for the year 2024, which included details on the company's ongoing projects and financial expectations.
Kinetik Holdings, actively engaged in multiple projects in New Mexico, is anticipated to see growth from its Kings Landing complex projects and gathering and processing (G&P) agreements in Eddy and Lea Counties. These developments follow the company's acquisition of Durango, positioning Kinetik for further expansion in the region.
Despite the requirement for additional capital expenditure, which Kinetik projects to be in the mid-single digit multiples, the company is expected to produce positive free cash flow within the forecast period. This projection is a key factor in RBC's maintained Outperform rating.
RBC's confidence in Kinetik Holdings is bolstered by higher estimates for 2025 and an increased EBITDA multiple. The firm's analysts believe that the strategic investments and projects currently underway will contribute significantly to Kinetik's financial performance in the coming years.
In other recent news, Kinetik Holdings Inc. has been the subject of an adjusted price target by Goldman Sachs, which reduced it from $46 to $45, while maintaining a buy rating. This adjustment follows Kinetik's recent second-quarter results for 2024, which met estimates and consensus.
The company's EBITDA forecast for 2024 has been revised to between $940 million and $980 million, factoring in contributions from the recent Durango acquisition and the divestiture of the remaining interest in the GCX project.
Kinetik Energy Inc. also reported a successful second quarter with a 13% year-over-year increase in adjusted EBITDA, reaching over $234 million. The company generated $163 million in distributable cash flow and $105 million in free cash flow.
Kinetik's President and CEO, Jamie Welch, highlighted the successful integration of the Durango acquisition and its positive impact on the company's diversification.
Furthermore, the company has identified substantial growth potential in New Mexico, particularly with the Kings Landing II project. However, this anticipated growth is contingent upon increased capital expenditures. Despite these adjustments, Goldman Sachs' stance on Kinetik Holdings remains positive, with a continued Buy rating on the stock.
InvestingPro Insights
Following the updated outlook by RBC Capital Markets on Kinetik Holdings Inc. (NYSE:KNTK), current data from InvestingPro further enriches the narrative surrounding the company's financial health and market position. With a market capitalization of $6.64 billion and a P/E ratio of 8.14, Kinetik Holdings is trading at a valuation that suggests a favorable earnings outlook. This is further reinforced by a PEG ratio of 0.13, indicating that the stock is trading at a low price relative to near-term earnings growth, an InvestingPro Tip worth noting for potential investors.
Moreover, Kinetik's dividend yield stands at a significant 7.12%, a testament to the company's commitment to returning value to shareholders. This aligns with another InvestingPro Tip highlighting the stock's substantial dividend payout. While the company is trading near its 52-week high with a price at 93.13% of this peak, it has experienced a large price uptick with a 6-month total return of 34.76%, suggesting strong recent performance.
For those seeking more in-depth analysis, there are additional InvestingPro Tips available that delve into other facets of Kinetik's financials and market behavior. These insights, along with real-time metrics, can be found at https://www.investing.com/pro/KNTK, offering a comprehensive look into the company's investment potential.
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