HESM: Dividend Strength And Buybacks Will Offset Chevron Bakken Uncertainty

Analysts have lowered their price target for Hess Midstream to $37 from $41 per share. They cite slower growth expectations because of anticipated reductions in Chevron's Bakken rig activity and a more cautious outlook for future earnings.

Analyst Commentary

Recent analyst reports on Hess Midstream reflect a shift in sentiment as growth outlooks and capital return expectations are reassessed in light of developments in the Bakken region. The consensus on the company has moderated, with adjustments to both ratings and price targets amid uncertainty around Chevron's plans.

Bullish Takeaways

• Strong, long-term contracts are seen as providing support for Hess Midstream's cash flows. These contracts help to limit near-term downside volatility, even in a softer oil price environment.
• Analysts highlight the company’s ability to continue growing its dividend by over five percent annually, underpinned by relatively low capital expenditure needs.
• Capital return potential remains attractive. The company maintains continued capacity for share buybacks despite slower overall growth expectations.
• The current valuation is considered full by some. However, the solid contract structure and dividend growth provide support for investors seeking stable returns.

Bearish Takeaways

• Renewed downside risks have emerged as Chevron plans to reduce rig activity in the Bakken. This development directly impacts Hess Midstream’s anticipated EBITDA growth and makes future earnings less predictable.
• Analysts have lowered EBITDA estimates by ten to twelve percent in their models. They now expect flat growth in 2026, reflecting muted operational momentum.
• The company’s overall risk/reward profile appears more balanced following recent industry changes. Growth prospects are now tied closely to less certain Chevron-driven development.
• Some analysts suggest that, while a potential buyout remains possible, Hess Midstream's standalone prospects are less compelling given the latest market dynamics.

What's in the News

• Hess Midstream completed the repurchase of 1,764,839 shares, or 1.35% of shares outstanding, for $70 million under its previously announced buyback program (Key Developments).
• The company issued earnings guidance for the fourth quarter and full year 2025, expecting net income of $170 million to $180 million for Q4 and $685 million to $695 million for the full year (Key Developments).
• Quarterly cash distribution was raised to $0.7548 per Class A share for Q3 2025, supported by recent repurchases and above targeted 5% annual growth in distributions through 2027 (Key Developments).
• Updated full-year 2025 production guidance reflects lower anticipated gas gathering and processing volumes due to adverse weather, maintenance, and lower third-party volumes (Key Developments).
• Earnings guidance for Q3 and full-year 2025 was revised to indicate net income at the lower end of previously announced ranges (Key Developments).

Valuation Changes

• Consensus Analyst Price Target remained steady at $37 per share, showing no change from previous estimates.
• Discount Rate decreased slightly from 7.47% to 7.16%, reflecting a modest reduction in perceived risk or a shift in capital costs.
• Revenue Growth expectations declined from 3.2% to 2.2%, indicating a more cautious outlook on top-line expansion.
• Net Profit Margin improved from 31.6% to 35.9%, highlighting enhanced profitability projections despite softer growth.
• Future P/E ratio fell from 13.5x to 11.6x, suggesting the stock is now valued at a lower multiple of expected earnings.