The case for & against
Bull & Bear analysis
Hess Midstream LP (NASDAQ: HESM) operates as a key player in the midstream energy sector, specializing in the infrastructure for processing, transporting, and terminaling crude oil and natural gas. The company has established a robust operational framework and financial strategy, strategically positioned to capitalize on the growing demand for energy resources while ensuring sustainable shareholder returns. Hess Midstream operates in a competitive environment, primarily driven by its affiliations with major producers like Chevron, enabling it to leverage operational efficiencies for growth. The company is part of the broader oil and gas industry and is particularly impacted by fluctuations in production activities and capital expenditure trends.
Bull says
- ↑Q2 net income of $174M (+10% QoQ) and adjusted EBITDA of $314M.
- ↑2026 adjusted free cash flow guidance of $910–960M (+20% YoY).
- ↑Gross adjusted EBITDA margin held at 85% vs. 75% target.
- ↑Returned $280M excess FCF to shareholders; offers notable dividend yield.
- ↑Chevron partnership to lift throughput by ~5% in H2, boosting revenues.
- ↑High earnings yield and strong profitability factors; benefits from oil price sensitivity.
Bear says
- ↓Q2 capex at $31M, expected to increase in Q3, pressuring FCF.
- ↓Weather disruptions and maintenance risks could hit throughput guidance.
- ↓Leverage ~3× with weak credit profile raises refinancing concerns.
- ↓Analysts forecast flat Q3 adjusted EBITDA, suggesting revenue stagnation.
- ↓Negative growth factors and low earnings revisions signal slowing growth.
- ↓Weak fundamental health and small size factor may limit scale benefits.
Investment themes with HESM
Producers and distributors of natural gas
Earnings Call · Q2 2023 · Mgmt. Guidance