Hess Midstream (HESM): Evaluating Value After Quarterly Distribution Hike and Strong Cash Flow Signals

Hess Midstream just declared a bump in its quarterly cash distribution to $0.7548 per Class A share. The move is backed by solid adjusted free cash flow and unit repurchases, highlighting the company’s ongoing commitment to capital returns.

See our latest analysis for Hess Midstream.

Hess Midstream’s latest quarterly distribution hike comes as the share price has slipped roughly 20% over the past three months. Still, investors who have held on for the longer term have been rewarded, with a 6% total return over one year and a standout 205% total return over five years. This suggests solid long-term compounding even amid recent volatility.

If the focus on strong capital returns sparks your curiosity, now is a great moment to discover fast growing stocks with high insider ownership.

With the stock down nearly 20% in three months but boasting steady distribution growth and a history of strong returns, investors now face a key question: is Hess Midstream undervalued, or is future growth already priced in?

Most Popular Narrative: 14.6% Undervalued

Hess Midstream’s most widely followed narrative points to a fair value of $40, which stands above the last close of $34.14. This sets out an ambitious growth case that shapes investor expectations.

Multi-year minimum volume contracts with Hess Corp (now under Chevron) provide highly predictable, inflation-resistant fee-based revenue streams through the late 2030s. This supports stable adjusted EBITDA and consistent dividend/distribution growth. A large, strategic, and largely irreplaceable infrastructure footprint in the core Bakken shale, combined with ongoing investments such as compressor stations and the Capa gas plant, enables Hess Midstream to capture incremental volume growth as domestic and export energy needs remain high. These factors further support margin and EBITDA expansion.

Read the complete narrative.

Curious what powers this price difference? The growth math here relies on bold profit margin expansion and aggressive forward earnings forecasts. If you want to see which trend or assumption tips this story, you’ll want to explore the numbers driving this striking fair value.

Result: Fair Value of $40 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing Chevron rig activity and possible Bakken production declines could challenge Hess Midstream’s growth and test the durability of its current outlook.

Find out about the key risks to this Hess Midstream narrative.

Another View: A Look at Earnings Multiples

Taking a different approach, some investors focus on the company’s price-to-earnings ratio. At 15.4x, Hess Midstream trades above the US Oil and Gas industry average of 12.8x, but is below the peer average of 30.4x. Compared to a fair ratio of 19.2x, this suggests potential upside if the market’s view shifts. In the end, this gap may highlight hidden value, or it could be a sign of concerns about future growth.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Hess Midstream Narrative

If you have a different outlook or would rather dive into the details yourself, you can craft your own narrative in just a few minutes. Do it your way.

A great starting point for your Hess Midstream research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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