On Friday, Citi resumed coverage of EQT Corp (NYSE:EQT (ST:EQTAB)) stock with a Neutral rating and set a price target of $37.00. The coverage, which had been previously suspended, was taken over by Scott Gruber. The firm acknowledges the challenges faced by EQT following its acquisition of ETRN, which initially caused some unease among investors.
However, Citi suggests that perceptions of the deal might improve over time due to expected improvements in the company's cost structure and a potential decrease in capital intensity, especially after investments in compression are made.
The analysis points out that EQT's journey towards these improvements is a multi-year process. In the short term, the natural gas market's rebalancing is seen as sluggish, influenced by factors such as the launch of the Matterhorn project, potential mild winter weather, delays in LNG facility construction, and reduced production volumes.
Despite these challenges, EQT is expected to meet its debt reduction targets by increasing asset sales, although this strategy may reduce EBITDA contributions from the divested assets.
Citi's outlook for EQT is more promising in the long term, suggesting that the company could become a desirable energy and production holding by 2025. This optimism is based on anticipated recovery in gas prices, continued debt reduction, and further reductions in capital intensity beyond 2026. However, the report cautions that near-term macroeconomic factors could keep EQT's stock within a tight trading range for the time being.
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