On Wednesday, Stifel adjusted its stance on DT Midstream (NYSE:DTM) stock, downgrading it from Buy to Hold, despite increasing the price target to $89 from $78. The firm's revised outlook followed DT Midstream's third-quarter results which met expectations and included an improved EBITDA guidance for 2024.
The company's management discussed progress on potential data center projects, though no official announcements were made. They also referenced the Birdsboro lateral project as a potential model for future endeavors.
Additionally, DT Midstream provided insights into the natural gas market for the upcoming year, indicating a possible increase in demand in the fourth quarter. However, the extent of the ramp-up in 2025 remains uncertain, hinging on producer plans and seasonal effects on gas storage.
Stifel's decision to upgrade the price target reflects alignment with market valuations, while the downgrade to a Hold rating is based on the current share price, which is trading at 11.5 times the firm's 2025 EBITDA estimate. According to Stifel, this valuation adjustment acknowledges DT Midstream's successful execution of its growth strategy.
"In other recent news, DT Midstream reported a strong Q2 2024 with an adjusted EBITDA of $248 million, and has reaffirmed its guidance for the year. The company has also completed the LEAP Phase 3 expansion ahead of schedule and is in discussions for a LEAP Phase 4 expansion.
Barclays (LON:BARC) and Citi analysts have respectively raised their stock targets to $85 and $76, while maintaining their Overweight and Neutral ratings. DT Midstream also secured a $420 million distribution from a private placement of senior unsecured notes by Millennium Pipeline Intermediate Holdings, which is expected to strengthen its financial position.
In addition, the company is under confidentiality agreements, suggesting potential announcements of new data center projects. These recent developments reflect DT Midstream's strategic initiatives and financial decisions in the natural gas infrastructure sector."
InvestingPro Insights
DT Midstream's recent performance aligns with several key metrics and insights from InvestingPro. The company's stock is currently trading near its 52-week high, with a strong return of 75.22% over the last year. This performance is reflected in Stifel's decision to raise the price target, despite the downgrade to Hold.
InvestingPro data shows that DT Midstream has a P/E ratio of 21.13, which is consistent with Stifel's observation of the stock trading at 11.5 times the 2025 EBITDA estimate. The company's revenue growth of 4.34% in the last twelve months and a robust EBITDA growth of 9.62% support the positive outlook on its execution of growth strategies.
Two relevant InvestingPro Tips for investors to consider are:
1. DT Midstream has raised its dividend for 4 consecutive years, with a current dividend yield of 3.29%. This demonstrates the company's commitment to shareholder returns, which may be attractive to income-focused investors.
2. The company is profitable over the last twelve months, with a strong operating income margin of 51.66%. This profitability supports the company's ability to fund future growth projects, such as the potential data center initiatives mentioned in the earnings call.
InvestingPro offers 12 additional tips for DTM, providing a more comprehensive analysis for investors interested in deeper insights into the company's financial health and market position.
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