Appalachian Natural Gas Infrastructure Will Drive Enduring Value

Key Takeaways

• Long-term gas contracts and strategic infrastructure investments position EQT for stable, high-quality cash flow and sustained margin expansion amid rising demand.
  
• Efficiency gains, cost control, and balance sheet improvements enhance free cash flow, supporting shareholder returns and a stronger financial profile.
  
• Heavy reliance on natural gas, regulatory risks, and concentrated geographic exposure threaten long-term growth, margins, and strategic flexibility amidst energy transition and rising competition.

Catalysts

Engages in the production, gathering, and transmission of natural gas.

• The ramp-up of large-scale, long-term (20-year) natural gas supply contracts to new AI data centers and power generation facilities in Appalachia-beginning in 2027-2028-positions EQT to capture outsized in-basin demand growth from electrification and digital infrastructure, creating predictable, high-quality revenue and substantially increasing upstream and midstream free cash flow.
  
• Accelerating U.S. LNG export capacity-coupled with delays in global competing projects and tightening U.S. supply-supports structurally higher U.S. natural gas price floors through the decade, which, when paired with EQT's low-cost structure, should drive robust earnings and margin expansion as legacy contracts roll and new export-linked pricing is realized.
  
• Execution on a $1 billion pipeline of organic, low-risk, fee-based midstream and infrastructure projects with minimum volume commitments and index-plus pricing creates stable, annuity-like cash flows, lowering business volatility and raising the durability of free cash flow and earnings.
  
• Continued capital efficiency gains from advanced drilling, completion technologies, and strategic acquisitions (e.g., Olympus Energy and Equitrans) are reducing per-unit costs and maintenance capital requirements, resulting in higher net margins and freeing incremental cash for growth projects and shareholder returns.
  
• Ongoing balance sheet deleveraging-targeting net debt reduction to $5 billion or less-will reduce interest expenses, support an investment-grade credit profile, and enable more opportunistic share repurchases and dividend growth, ultimately improving per-share earnings power and valuation multiples.

EQT Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming EQT's revenue will grow by 11.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 16.1% today to 38.7% in 3 years time.
• Analysts expect earnings to reach $3.8 billion (and earnings per share of $5.88) by about September 2028, up from $1.1 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $5.9 billion in earnings, and the most bearish expecting $2.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.6x on those 2028 earnings, down from 27.4x today. This future PE is greater than the current PE for the US Oil and Gas industry at 12.6x.
• Analysts expect the number of shares outstanding to grow by 4.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.23%, as per the Simply Wall St company report.

EQT Future Earnings Per Share Growth

Risks

• The global shift toward decarbonization and net-zero targets may accelerate over the next decade, which could reduce long-term demand for natural gas as utilities and industries favor renewables and storage, potentially leading to lower revenues and margins for EQT.
  
• Increasing regulatory scrutiny, carbon taxation, or more aggressive methane reduction mandates could raise operating costs and compress net margins, particularly as EQT undertakes large infrastructure projects that may attract environmental opposition or delay.
  
• EQT's long-term growth strategy remains concentrated in the Appalachian Basin, which creates overreliance risks such as potential reserve depletion or the need to spend heavily on new exploration, threatening future production growth and requiring high capital expenditures that could diminish free cash flow.
  
• The company's outlook assumes tightening basis differentials and strong in-basin demand due to AI/data center power growth; however, overestimation of this demand, underinvestment in renewables, or overbuilding of infrastructure could result in oversupply, lower realized prices, and weak earnings.
  
• Intensifying competition from larger energy companies and lower-cost producers, combined with possible pipeline bottlenecks or permitting delays, could restrict EQT's ability to scale production and infrastructure as planned, directly impacting expected revenue growth and operating efficiency.

Valuation

• The analysts have a consensus price target of $63.08 for EQT based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $42.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.8 billion, earnings will come to $3.8 billion, and it would be trading on a PE ratio of 14.6x, assuming you use a discount rate of 7.2%.
• Given the current share price of $50.25, the analyst price target of $63.08 is 20.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.