Citi Reaffirms Buy Rating for EnLink Midstream Amid New Insights
Citi Supports EnLink Midstream with Positive Outlook
Recently, Citi affirmed its Buy rating on EnLink Midstream, LLC (NYSE: ENLC), with a consistent price target set at $15.00. This confident stance is primarily anchored on the expectation that EnLink will achieve a third-quarter 2024 EBITDA of $325 million, slightly below the analysts' consensus of $330 million. This forecast reflects anticipated volume growth in the Permian and Oklahoma regions, as well as seasonal impacts in Louisiana.
Financial Performance Expectations
EnLink Midstream is projected to show a sequential uptick in its financial performance due to these favorable factors. Nevertheless, Citi cautions that the Matterhorn project may not provide a significant boost until the fourth quarter of 2024. EnLink is also considering a plan to relocate a processing plant in the Permian Basin, which represents a potentially more efficient alternative to building a new facility.
Guidance and Market Focus
In terms of guidance, EnLink Midstream is optimistic about aligning its 2024 EBITDA results with the median of its projected range. Although a substantial improvement is required in the latter half of 2024 to achieve this, the company has historically demonstrated a strong commitment to reaching its targets.
The interest of the market now extends beyond immediate quarterly results, particularly towards ONEOK Inc.'s (OKE) forthcoming bid to buy out the remaining interest in EnLink Midstream. In light of this potential acquisition, EnLink Midstream has indicated it will temporarily cease its public common stock buybacks, focusing instead on strategic maneuvers that align with this acquisition plan.
Recent Financial Developments
In recent developments, EnLink Midstream has made notable strides in its financial strategy. The firm enacted a Credit Agreement Amendment, allowing it to exclude up to $500 million of obligations from its accounts receivable securitization facility from its leverage ratio calculations. This amendment aligns with ONEOK's transaction to acquire equity interests in EnLink.
Additionally, EnLink reported a robust second quarter for 2024, achieving $306 million in adjusted EBITDA and initiating a $50 million unit repurchase. Moreover, the company has successfully closed a $500 million public offering of senior notes backed by its subsidiary, EnLink Midstream Partners, LP.
Analyst Outlook and Market Reactions
In the wake of these developments, analysts have adjusted their outlooks on EnLink Midstream. Notably, both Morgan Stanley and Wells Fargo have downgraded the stock from Overweight to Equalweight, maintaining a price target of $15.00. These downgrades were influenced by ONEOK's initiative to obtain a controlling stake in EnLink Midstream.
ONEOK’s Strategic Acquisition Plans
ONEOK, Inc. is moving forward with plans to acquire the controlling interest in EnLink Midstream from Global Infrastructure Partners. This transaction, which encompasses the acquisition of all equity interests in both EnLink Midstream and its subsidiaries, is poised to broaden ONEOK's midstream service portfolio once finalized in late 2024.
Investing Insights and Metrics
With Citi's ongoing positive view on EnLink Midstream, LLC (NYSE: ENLC), investors are encouraged to delve into additional metrics that may affect their investment decisions. As of now, EnLink's market capitalization is approximately $6.65 billion, with a price-to-earnings (P/E) ratio of 44.88. This figure is notably higher than industry norms, suggesting that the stock holds a premium valuation. Adjusted P/E figures for the trailing twelve months as of Q2 2024 indicate a ratio of 38.65, still implying significant valuation.
The firm's revenue over the last twelve months, as of Q2 2024, is $6.833 billion, noting a 14.01% drop in revenue growth. However, it's essential to highlight that EnLink Midstream experienced a 2.18% quarterly revenue growth in Q2 2024, pointing towards a possible recovery path. Significantly, the company has maintained dividend payments for 11 consecutive years, boasting a current dividend yield of 3.64%, appealing to income-oriented investors.
Market Reactions and Stock Dynamics
Moreover, there are some noteworthy observations influencing EnLink Midstream's stock performance. The company's stock is experiencing high volatility, which may affect short-term investment strategies. Currently, the stock is trading close to its 52-week high, at approximately 97.94% of this peak value, reflecting its solid recent performance. For investors seeking more insights into EnLink Midstream's financial condition and future trajectory, there are ample avenues to explore its financial health further.
Frequently Asked Questions
What is Citi's rating for EnLink Midstream?
Citi maintains a Buy rating on EnLink Midstream with a price target of $15.00.
What is the anticipated EBITDA for EnLink Midstream in Q3 2024?
EnLink Midstream is expected to achieve an EBITDA of $325 million in Q3 2024.
What recent financial developments has EnLink made?
EnLink entered a credit amendment allowing exclusions under its leverage ratio and announced a public offering of $500 million in senior notes.
Why was EnLink downgraded by some analysts?
Analysts downgraded EnLink due to ONEOK's announcement of acquiring a controlling interest in the company.
What does EnLink's current dividend yield indicate?
EnLink Midstream has a current dividend yield of 3.64%, which may attract income-focused investors.
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