Goldman Sachs Maintains Sell Rating on Plains GP Holdings (PAGP)

Goldman Sachs Maintains Sell Rating on Plains GP Holdings (PAGP)

Goldman Sachs has reaffirmed its Sell rating on Plains GP Holdings, L.P. (NASDAQ: PAGP), retaining a price target of $17. This decision comes just ahead of the company’s anticipated third-quarter earnings for the year, which revolves around crucial factors such as operations in the Midland and Delaware regions, projections regarding Permian growth, and possible expansion opportunities through bolt-on acquisitions.

The expected EBITDA for Plains GP Holdings in the upcoming third quarter is $665 million, a figure that aligns with Goldman Sachs' earlier predictions and slightly exceeds the consensus estimate of $653 million. This projection reflects a mix of influences, including a decline in marketing gains from the previous quarter, modified iso-to-normal butane spreads in natural gas liquids (NGLs), and deferred operational costs into the latter half of the year. However, these elements are expected to be counterbalanced by robust expansion within the Permian operations, especially in long-haul transportation.

EBITDA Estimates and Valuation Considerations

In their financial outlook for the full year 2024, Goldman Sachs anticipates EBITDA for Plains GP Holdings reaching $2,780 million, which is slightly above the consensus estimate of $2,766 million. Regardless of the favorable numbers, the firm's analysis remains cautious, maintaining the $17 price target for both Plains All American (PAA) and PAGP while sustaining their Sell rating for both.

This ongoing evaluation indicates that the performance in the third quarter will be affected by various sequential drivers. Key metrics influencing this performance include the aforementioned operating factors and the anticipated positive growth trajectory in the Permian region, which plays a vital role in the company’s overall growth strategy.

Performance Insights on PAGP

Recent market performance insights for Plains GP Holdings (PAGP) reveal contrasting signals against the backdrop of Goldman Sachs' analysis. Despite the Sell rating, PAGP has demonstrated a remarkable total return of 104.35% over the past year, reflecting an impressive 80.77% return year-to-date. This strong showing indicates that the stock price has reached nearly its 52-week high, evidencing a notable level of investor confidence.

Financial Ratios and Growth Metrics

Examining the financial health of PAGP further illustrates a mixed profile. The company currently has a low P/E ratio of 8.08, which may hint at the potential for undervaluation. However, when adjusting for the last twelve months as of Q2 2024, the adjusted P/E ratio rises to 10.78. This disparity may suggest the necessity for adjustments reflecting one-off events or shifts in the earnings forecast.

Earnings and Asset Utilization

An examination of earnings per share shows positive growth trends over the last year, which aligns with PAGP's robust stock price performance. Moreover, the return on assets for the company stands impressively high at 126.1%, indicating effective utilization of its asset base, which is a positive aspect for potential investors.

Frequently Asked Questions

What is the current rating from Goldman Sachs for PAGP?

Goldman Sachs maintains a Sell rating on Plains GP Holdings (PAGP) with a price target of $17.

How is PAGP performing in the stock market?

PAGP has shown impressive price performance, with a total return of 104.35% over the last year and 80.77% year-to-date.

What factors are influencing PAGP's expected EBITDA?

The expected EBITDA for the upcoming quarter is influenced by various factors including regional performance, transportation efficiencies, and operational costs.

What does PAGP's P/E ratio indicate?

PAGP's low P/E ratio of 8.08 may indicate potential undervaluation, but the adjusted ratio of 10.78 suggests other financial considerations.

How does PAGP utilize its assets?

PAGP has a return on assets of 126.1%, showing efficient use of its assets, which is an attractive aspect for investors.

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