In a report released on January 24, Gabe Moreen from Mizuho Securities reiterated a Buy rating on Western Midstream Partners (WES – Research Report), with a price target of $34.00.
Gabe Moreen has given his Buy rating due to a combination of factors that suggest Western Midstream Partners (WES) has a strong free cash flow (FCF) capacity despite the recent heavy capital expenditures (capex) related to growth projects and acquisitions. Although the adjusted EBITDA growth has been relatively flat since 2020, the firm’s comprehensive strategy, including its approach to capital allocation, and the expected special distribution, contribute to a positive long-term capital return outlook for WES. Moreen remains constructive on the company’s ability to generate FCF and navigate through the increased capex following the Meritage acquisition.
The analyst’s outlook acknowledges the elevated capex for 2024, primarily due to the construction of the North Loving processing plant and the partial spend on Mentone III. Despite some capex needs being pushed into 2024, WES’s management expects to return to pre-acquisition leverage levels by the end of 2024. This suggests a potential pullback on equity capital return as the company focuses on reducing its debt. Moreen’s forecast for total capex in the coming years reflects an anticipation of WES’s continued investment in infrastructure to support expected volume growth, particularly in the Permian Basin, which should contribute to the firm’s robust FCF and underpin the Buy rating.
According to TipRanks, Moreen is a 5-star analyst with an average return of 6.3% and a 72.18% success rate. Moreen covers the Energy sector, focusing on stocks such as Sunoco, Enterprise Products Partners, and Kinder Morgan.
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Western Midstream Partners (WES) Company Description:
Western Midstream Partners LP owns, operates, acquires and develops midstream energy assets. It engages in the business of gathering, processing, compressing, treating, and transporting natural gas, condensate, natural gas liquids, and crude oil for Anadarko, as well as third-party producers and customers. The company was founded in 2007 and is headquartered in The Woodlands, TX.
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