| Snowflake Score | |
|---|---|
| Valuation | 4/6 |
| Future Growth | 2/6 |
| Past Performance | 2/6 |
| Financial Health | 1/6 |
| Dividends | 2/6 |
AM Stock Overview
Antero Midstream Corporation owns, operates, and develops midstream energy infrastructure.
Antero Midstream Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$10.08 |
| 52 Week High | US$11.71 |
| 52 Week Low | US$8.42 |
| Beta | 2.47 |
| 1 Month Change | 8.39% |
| 3 Month Change | 3.81% |
| 1 Year Change | 7.81% |
| 3 Year Change | 46.09% |
| 5 Year Change | -45.89% |
| Change since IPO | -54.18% |
Recent News & Updates
Antero Midstream: Free Cash Flow Differences
The entire capital budget is part of free cash flow calculations. Non-GAAP measures have to be reviewed and adjusted as needed to be compared. They are not readily comparable as a rule. Antero Midstream has a debt ratio less than 4. Finances are very conservative for a midstream company. Energy Transfer puts maintenance capital into the same set of calculations. Energy Transfer has a higher debt plus preferred ratio to either EBITDA or cash flow when compared to Antero Midstream. (Note: This article appeared in the newsletter on August 3, 2022.) Antero Midstream Corporation (AM) is a company that usually catches a lot of criticism for its skimpy dividend coverage. Missing from the conversation are the different calculations that occur when a non-GAAP measure is used. An adjustment to such a measure is a necessary requirement before a reasonable comparison can be made between companies. Otherwise, "apples and oranges" are being compared to the point that an investor can come to an incorrect conclusion. The Calculation Antero Midstream uses a very conservative definition of free cash flow, as shown below: Antero Midstream Free Cash Flow Calculation (Antero Midstream Second Quarter 2022, Earnings Press Release.) This management subtracts the total capital budget from net cash provided by operating activities. That is about as conservative as you can get in the industry. Many other companies simply subtract maintenance capital because they intend to borrow at least some money to finance the expansion capital budget. This management has a goal to reduce an already conservative (for midstream companies) debt ratio. Therefore, any and all expenditures that are likely to increase debt are included in the free cash flow after dividends calculation. This management has demonstrated in the past that the dividend will not be raised if debt cannot be handled to the conservative goals stated. That is very different from a lot of companies that do not cut dividends or distributions until there is trouble ahead. Since the debt ratio is comfortably below 4, there is unlikely to be any financial trouble because that is one of the lowest ratios in the midstream industry. Free Cash Flow Guidance The dividend is likely to be maintained because free cash flow is projected to grow considerably. That also implies that there will be dividend growth in the future. Antero Midstream Free Cash Flow Guidance And History (Antero Midstream Second Quarter 2022, Earnings Slide Presentation.) Management is currently holding the dividend steady because they want to reduce debt from currently fairly conservative levels. The capital budget is projected to decline while volumes handled are likely to continue to grow slowly over time. This midstream company does not service all of the parent company production. As long as that is the case, capital needs and midstream growth can differ from the parent company overall growth guidance. Similarly, once the basic midstream structure is in place, then expansion of capacity as needed is often accomplished with small capital projects that tend to pay back quickly. That means that the chart shown above is plausible. Now an acquisition of bolt-on midstream capacity or a major expansion into some production areas that were not previously covered are not factored into the guidance above. But the overall goal is to service the parent company, Antero Resources Corporation (AR), while maintaining considerable financial flexibility that one seldom sees in other midstream companies. Self-financing of capital projects has been the rule here since the company went public. That means that a relatively high percentage of cash flow has been reinvested in the business. Therefore, the earnings growth should compound a little faster than is the case with many competitors. Energy Transfer Distributable Cash Flow Calculation Energy Transfer LP (ET) has a fairly typical distributable cash flow calculation that nonetheless illustrates the pitfall of blindly comparing distributable cash flows: Energy Transfer Second Quarter 2022, Distributable Cash Flow Calculation (Energy Transfer Second Quarter 2022, Earnings Press Release) Since free cash flow and distributable cash flow are not GAAP numbers, managements are free to include or exclude anything they want in the presentation of these numbers. Even though there are some general agreements about what should be in the numbers, a motivated management can differ literally at will as long as there is a note somewhere disclosing how the number was calculated. For that reason, comparison of numbers without a GAAP definition can be a real challenge. The difference between the calculation for Antero Midstream and Energy Transfer is clearly stated in the two calculations. Antero Midstream put the whole budget into the free cash flow calculation (and basically uses that also as distributable cash flow) whereas Energy Transfer clearly uses only maintenance capital. Therefore, Energy Transfer is going to have robust coverage because maintenance capital is generally a fairly small part of the capital budget. In order to compare distribution (or dividend) coverage of the two companies either they both use maintenance capital, or they both use the whole capital budget. For the individual investors, that makes comparing non-GAAP numbers a real challenge if you want to compare several companies. Similarly, if there is an acquisition, Energy Transfer is not as likely to enter the acquisition expenditures (except for income statement items) whereas a conservative competitor like Enterprise Products Partners (EPD) is more likely to consider that in a distributable cash flow calculation. Debt Considerations In addition to the different calculations, there is the balance sheet structure as well. Both of these companies have very different financial structures. Antero Midstream has a leverage ratio that is under 4. No matter how one views the ratio, the fact is that the company can borrow to maintain the dividend for some time to come. Management has a goal to reduce that debt ratio to 3. That debt ratio would be among the lowest of the midstream debt ratios in the companies that I follow. On the other hand, Energy Transfer has a leverage ratio that is calculated with $48 billion of long-term debt combined with $6 billion of preferred. Even with the guided EBITDA of at least $12 billion, the ratio of senior claims to the common unit is well on its way to 5 (though less than 5) which is far higher than the debt ratio of Antero Midstream.
Better Buy: Kinder Morgan's 6.7% Yield Or Antero's 9.9%?
KMI and AM are both midstream C-Corps with very stable cash-flowing business models. While AM's yield is ~320 basis points greater than KMI's, KMI boasts a meaningfully higher credit rating. We compare the business models, balance sheets, growth potential, and valuation to determine which is the better buy today. Kinder Morgan (KMI) and Antero Midstream (AM) are both midstream C-Corps (meaning that they issue the 1099 tax form instead of the often dreaded K-1 tax form) with very stable cash-flowing business models. While AM's yield is ~320 basis points greater than KMI's, KMI boasts a meaningfully higher credit rating, implying a lower risk profile. In this article, we will compare the business models, balance sheets, growth potential, and valuation of these two companies side-by-side to determine which is the better buy today. AM vs KMI: Business Models AM has a very low risk asset portfolio with an integrated full value chain midstream infrastructure system consisting of nearly 500 miles of pipelines that include gathering and compression, natural gas processing, and water delivery and blending assets which provide the first mile infrastructure to deliver gas to the LNG Fairway. The company's revenues are 100% fixed fee and inflation protected with CPI-linked contract escalators. 85% of its business mix is natural gas processing and gathering and 15% of it is water handling. These assets have also generated impressive returns on invested capital, with a 15% average ROIC since going public and a 17% ROIC during 2020 despite the enormous energy and COVID-19 related headwinds for the sector. Moving forward, management expects these ROIC numbers to improve even more to between 17% and 20% thanks to slashing capital expenditures and a strong cash flow profile boosted by growing volumes and inflation-linked contract escalators. While this paints a great low risk picture for the business, one very important consideration to keep in mind is that AM is largely beholden to Antero Resources (AR). AR owns a large stake in AM and AM's assets are largely custom built to service AR. While AR is posting very robust results and this symbiotic relationship between the two does contribute to AM's safety to some degree, it also could lead to some sort of conflict of interest down the road, so this is something investors should keep in mind. KMI, meanwhile, enjoys a major scale advantage and owns the largest natural gas transmission network, the largest CO2 transportation business, the largest independent refined products transportation network, and the largest independent terminal operation in North America. It owns a whopping 70,000 miles of natural gas pipelines while its natural gas liquids pipeline network spans 1,200 miles. This leads to it transporting ~40% of the United States' total natural gas consumption and exports. Its refined products pipeline network spans 6,800 miles and its crude pipelines span 3,100 miles. On top of that, its cash flow profile is similar to AM's in that virtually all (97%) of its cash flows are linked to take-or-pay fee-based/hedged contracts. However, instead of being dependent on primarily one non-investment grade client like AM is, KMI's counterparties are more diversified and 76% of them are investment grade or equivalent. As a result, while AM's business model is pretty good and overall low risk, KMI definitely wins the head-to-head competition. AM vs. KMI: Balance Sheets AM's balance sheet is not investment grade (BB from S&P), but it is rapidly heading in that direction. Its leverage ratio is one of the lower ones in the sector at 3.6x and it received an incredible three upgrades in 2021, rising from a very low junk rating of B- in late 2020 to BB by the end of 2021. Meanwhile, it has no debt maturities until 2026 and has $700 million of liquidity as of 3/31/22, giving it a very solid financial footing, particularly when combined with its stable cash flow profile. On top of that, the company is expected to generate between $700 and $800 million in free cash flow after dividends between now and 2026, and is focused on using that free cash flow exclusively for paying down its $3.15 billion debt pile into 2024. That means it will likely be able to pay off its current balance on its credit facility prior to its maturity in 2026, giving it an improved debt profile once its maturities begin coming due in the latter half of this decade. As a result, we expect management to be able to meet its goal of reducing leverage below 3x by 2024, which we also expect will likely result in an upgrade to an investment grade credit rating. This should greatly improve its refinancing terms and may be enable AM to refinance its debt ahead of schedule to reduce interest expense. KMI meanwhile has a meaningfully higher credit rating at BBB with plenty of liquidity and a well-laddered debt maturity profile. While AM's balance sheet is certainly in good shape for the foreseeable future and appears poised to continue improving, KMI still has a considerable edge here. AM vs. KMI: Growth Potential From a growth perspective, both businesses are slashing capital expenditures and are focused on maximizing free cash flow. However, analysts expect AM to grow its distributable cash flow per share at an 8.9% CAGR through 2026 in contrast to KMI's 4.4% expected distributable cash flow per share CAGR over the same time frame. This is largely driven by the superior returns on invested capital that AM tends to generate and its more aggressive debt paydown profile (leading to interest expense savings) relative to KMI.
Shareholder Returns
| AM | US Oil and Gas | US Market | |
|---|---|---|---|
| 7D | 0.6% | 1.5% | 1.2% |
| 1Y | 7.8% | 49.9% | -11.6% |
Return vs Industry: AM underperformed the US Oil and Gas industry which returned 49.4% over the past year.
Return vs Market: AM exceeded the US Market which returned -13.5% over the past year.
Price Volatility
| AM volatility | |
|---|---|
| AM Average Weekly Movement | 5.4% |
| Oil and Gas Industry Average Movement | 8.9% |
| Market Average Movement | 7.9% |
| 10% most volatile stocks in US Market | 17.0% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: AM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.
Volatility Over Time: AM's weekly volatility (5%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 2013 | 519 | Paul Rady | https://www.anteromidstream.com |
Antero Midstream Corporation owns, operates, and develops midstream energy infrastructure. It operates through Gathering and Processing, and Water Handling segments. The Gathering and Processing segment includes a network of gathering pipelines and compressor stations that collects and processes production from Antero Resources’ wells in West Virginia and Ohio.
Antero Midstream Fundamentals Summary
| AM fundamental statistics | |
|---|---|
| Market Cap | US$4.82b |
| Earnings (TTM) | US$326.84m |
| Revenue (TTM) | US$959.36m |
14.8x
P/E Ratio5.0x
P/S RatioIs AM overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| AM income statement (TTM) | |
|---|---|
| Revenue | US$959.36m |
| Cost of Revenue | US$163.56m |
| Gross Profit | US$795.80m |
| Other Expenses | US$468.96m |
| Earnings | US$326.84m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 0.68 |
| Gross Margin | 82.95% |
| Net Profit Margin | 34.07% |
| Debt/Equity Ratio | 141.6% |
How did AM perform over the long term?
See historical performance and comparisonDividends
8.9%
Current Dividend Yield132%
Payout RatioValuation
Is AM undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
4/6Valuation Score 4/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for AM?
Other financial metrics that can be useful for relative valuation.
| What is AM's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$4.82b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 8.3x |
| Enterprise Value/EBITDA | 11x |
| PEG Ratio | 3.5x |
Price to Earnings Ratio vs Peers
How does AM's PE Ratio compare to its peers?
| AM PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 18.9x | ||
ENLC EnLink Midstream | 25.7x | 8.9% | US$5.1b |
DTM DT Midstream | 16.5x | 6.2% | US$5.5b |
HESM Hess Midstream | 19.8x | 10.0% | US$7.0b |
PAA Plains All American Pipeline | 13.7x | 6.4% | US$7.9b |
AM Antero Midstream | 14.8x | 4.2% | US$4.8b |
Price-To-Earnings vs Peers: AM is good value based on its Price-To-Earnings Ratio (14.8x) compared to the peer average (18.9x).
Price to Earnings Ratio vs Industry
How does AM's PE Ratio compare vs other companies in the US Oil and Gas Industry?
Price-To-Earnings vs Industry: AM is expensive based on its Price-To-Earnings Ratio (14.8x) compared to the US Oil and Gas industry average (9.6x)
Price to Earnings Ratio vs Fair Ratio
What is AM's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 14.8x |
| Fair PE Ratio | 15.7x |
Price-To-Earnings vs Fair Ratio: AM is good value based on its Price-To-Earnings Ratio (14.8x) compared to the estimated Fair Price-To-Earnings Ratio (15.7x).
Share Price vs Fair Value
What is the Fair Price of AM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: AM ($10.08) is trading below our estimate of fair value ($19.35)
Significantly Below Fair Value: AM is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is less than 20% higher than the current share price.
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Future Growth
How is Antero Midstream forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?
Future Growth Score
2/6Future Growth Score 2/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
4.2%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: AM's forecast earnings growth (4.2% per year) is above the savings rate (1.9%).
Earnings vs Market: AM's earnings (4.2% per year) are forecast to grow slower than the US market (14.6% per year).
High Growth Earnings: AM's earnings are forecast to grow, but not significantly.
Revenue vs Market: AM's revenue (3.5% per year) is forecast to grow slower than the US market (7.9% per year).
High Growth Revenue: AM's revenue (3.5% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: AM's Return on Equity is forecast to be high in 3 years time (21.7%)
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Past Performance
How has Antero Midstream performed over the past 5 years?
Past Performance Score
2/6Past Performance Score 2/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
22.4%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: AM has high quality earnings.
Growing Profit Margin: AM's current net profit margins (34.1%) are lower than last year (35.8%).
Past Earnings Growth Analysis
Earnings Trend: AM has become profitable over the past 5 years, growing earnings by 22.4% per year.
Accelerating Growth: AM's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
Earnings vs Industry: AM had negative earnings growth (-5.3%) over the past year, making it difficult to compare to the Oil and Gas industry average (189.7%).
Return on Equity
High ROE: AM's Return on Equity (14.7%) is considered low.
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Financial Health
How is Antero Midstream's financial position?
Financial Health Score
1/6Financial Health Score 1/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: AM's short term assets ($77.1M) do not cover its short term liabilities ($123.8M).
Long Term Liabilities: AM's short term assets ($77.1M) do not cover its long term liabilities ($3.2B).
Debt to Equity History and Analysis
Debt Level: AM's net debt to equity ratio (141.6%) is considered high.
Reducing Debt: Insufficient data to determine if AM's debt to equity ratio has reduced over the past 5 years.
Debt Coverage: AM's debt is well covered by operating cash flow (22.3%).
Interest Coverage: AM's interest payments on its debt are not well covered by EBIT (3x coverage).
Balance Sheet
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Dividend
What is Antero Midstream current dividend yield, its reliability and sustainability?
Dividend Score
2/6Dividend Score 2/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
8.93%
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: AM's dividend (8.93%) is higher than the bottom 25% of dividend payers in the US market (1.51%).
High Dividend: AM's dividend (8.93%) is in the top 25% of dividend payers in the US market (4.09%)
Stability and Growth of Payments
Stable Dividend: AM has been paying a dividend for less than 10 years and during this time payments have been volatile.
Growing Dividend: AM's dividend payments have increased, but the company has only paid a dividend for 5 years.
Earnings Payout to Shareholders
Earnings Coverage: With its high payout ratio (131.5%), AM's dividend payments are not well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its high cash payout ratio (112.4%), AM's dividend payments are not well covered by cash flows.
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Management
How experienced are the management team and are they aligned to shareholders interests?
3.2yrs
Average management tenure
CEO
Paul Rady (68 yo)
3.42yrs
Tenure
US$5,388,890
Compensation
Mr. Paul M. Rady serves as Chief Executive Officer of TEP Rocky Mountain LLC. He serves as Chief Executive Officer and Chairman at Antero Midstream Corporation since March 2019 and its Director since 2019....
CEO Compensation Analysis
Compensation vs Market: Paul's total compensation ($USD5.39M) is below average for companies of similar size in the US market ($USD8.36M).
Compensation vs Earnings: Paul's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.
Leadership Team
Experienced Management: AM's management team is considered experienced (3.2 years average tenure).
Board Members
Experienced Board: AM's board of directors are considered experienced (3.4 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: AM insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
Company Information
Antero Midstream Corporation's employee growth, exchange listings and data sources
Key Information
- Name: Antero Midstream Corporation
- Ticker: AM
- Exchange: NYSE
- Founded: 2013
- Industry: Oil and Gas Storage and Transportation
- Sector: Energy
- Implied Market Cap: US$4.823b
- Shares outstanding: 478.46m
- Website: https://www.anteromidstream.com
Number of Employees
Location
- Antero Midstream Corporation
- 1615 Wynkoop Street
- Denver
- Colorado
- 80202
- United States
Listings
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/08/10 00:00 |
| End of Day Share Price | 2022/08/10 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2021/12/31 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.