On Tuesday, Goldman Sachs (NYSE:GS) adjusted its outlook on Antero Midstream Partners LP (NYSE:AM), lowering the price target to $14.50 from the previous $15.00, while maintaining a Neutral rating on the stock. This change follows the company's third-quarter results for the fiscal year 2024, which showed a weaker performance than anticipated, largely due to lower water contributions.
Antero Midstream reported that despite the slight dip in their quarterly performance, they have kept their EBITDA guidance for the year steady, forecasting between $1,035 million and $1,075 million. However, they also warned of possible incremental deferrals from their sponsor, Antero Resources (NYSE:NYSE:AR).
The company indicated that a single incremental pad delay into 2025 from the fourth quarter of 2024 could result in an approximately $10 million impact on their water segment.
In light of the potential deferrals and the ongoing weakness in the gas market, which is expected to persist until around mid-2025, Goldman Sachs has incorporated these considerations into their revised estimates. The firm's updated EBITDA forecast for Antero Midstream in 2024 now stands at $1,043 million, slightly below the consensus of $1,048 million.
Regarding capital allocation, Antero Midstream concluded the quarter with a leverage ratio of 3.1 times, which is still above the 3.0 times threshold required to increase its share buyback program. The management mentioned that a decrease in quarter-over-quarter capital expenditures should help them achieve this target in the current quarter.
However, specifics on the timing or scope of potential buyback activities were not provided, leading Goldman Sachs to anticipate a start to the buyback program in the first quarter of 2025.
Goldman Sachs has revised its estimates to incorporate a more conservative view on the water and gathering segments, given the reduced near-term activity levels from Antero Resources. Despite the adjustments for the coming year, the firm's projections for outer years remain largely unchanged. The new price target reflects these updates and Goldman Sachs' ongoing Neutral stance on Antero Midstream Partners LP.
In other recent news, Antero Midstream reported steady financial growth and commitment to debt reduction. In its third-quarter earnings call, the company disclosed a 2% year-over-year increase in EBITDA to $256 million and a 32% rise in free cash flow after dividends to $40 million. The company's leadership also anticipates a decline in capital expenditures in the fourth quarter of 2024, facilitated by favorable weather conditions.
In addition to these financial developments, Antero Midstream confirmed the Torreys Peak Compressor Station is on track, and strong international LPG pricing is benefiting the company's financial position. Despite some uncertainties, such as the pending Veolia payment, the company remains optimistic about achieving its leverage and growth targets.
This information is based on recent developments and does not serve as a comprehensive view of the company.
InvestingPro Insights
To complement Goldman Sachs' analysis, InvestingPro data offers additional context for Antero Midstream Partners LP (NYSE:AM). The company's market capitalization stands at $6.82 billion, with a P/E ratio of 17.46, suggesting a moderate valuation relative to earnings. Notably, AM boasts a strong dividend yield of 6.23%, which aligns with an InvestingPro Tip indicating that the company has maintained dividend payments for 8 consecutive years.
Despite Goldman Sachs' lowered price target, AM's stock has shown resilience with a 19.22% total return over the past year and a robust 22.93% year-to-date return. This performance is reflected in another InvestingPro Tip highlighting the stock's strong return over the last five years.
The company's financial health appears solid, with a gross profit margin of 81.49% and an operating income margin of 55.54% for the last twelve months as of Q3 2024. These figures suggest efficient operations, which could support the company's ability to navigate the challenges mentioned in Goldman Sachs' report.
For investors seeking a deeper understanding of Antero Midstream's prospects, InvestingPro offers 7 additional tips, providing a more comprehensive view of the company's financial position and market performance.
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