Key insights
- Goldman Sachs downgraded Hess Midstream to Sell due to concerns about volume growth, recontracting risks, and slowing capital returns. The firm's EBITDA estimates are below consensus. While the stock offers a high dividend yield and potential M&A appeal, the downgrade reflects a challenging risk/reward profile. Overall, this is a slightly bearish signal for HESM, but the broader market impact is limited.
Investing.com - Goldman Sachs downgraded Hess Midstream Partners LP (NYSE:HESM) to Sell from Neutral on Monday with a price target of $32, representing roughly 15% downside from the current stock price of $37.87.
The firm sees 7% downside to its price target versus 13% average upside for its coverage universe. Goldman Sachs views the company as a high-quality, well-contracted midstream business with a strong sponsor relationship but sees a more challenging risk/reward at current levels. The downgrade aligns with broader analyst sentiment, as InvestingPro data shows 2 analysts have revised their earnings downwards for the upcoming period. Despite the bearish outlook, the stock offers an 8.07% dividend yield and trades at a P/E ratio of 13.22, suggesting potential value for income-focused investors. InvestingPro analysis indicates the stock is undervalued relative to its Fair Value—making it one to watch on the platform’s Most Undervalued list.
The firm cited a volume growth profile likely to lag midstream peers due to a plateauing production outlook from Chevron in the basin, meaningful long-term recontracting risk as legacy fee agreements are meaningfully above market rates, and a slowing capital returns framework. Goldman Sachs is on average 5% below consensus on 2026-2030 EBITDA estimates.
Goldman Sachs noted Hess Midstream is a possible merger and acquisition target given its strategic partnership with Chevron, following Chevron’s past transaction of Noble Midstream after acquiring its sponsor Noble Energy. The firm assigned an M&A rank of 2 in its price target.
Goldman Sachs expects the basin to be somewhat resilient through the end of the decade with recent performance better than prior sentiment. Chevron continues to assess its interest in its newer Bakken position.
In other recent news, Hess Midstream announced its fourth-quarter 2025 earnings results, which aligned with analysts’ expectations, reporting an earnings per share (EPS) of $0.72. However, the company fell short of its revenue forecast, reporting $404.2 million against the anticipated $417.05 million, marking a 3.08% shortfall. Additionally, Hess Midstream has launched a $60 million share repurchase program, which includes the repurchase of Class B units and publicly traded Class A shares. Specifically, the company plans to buy back approximately $18 million of Class B units from a Chevron affiliate. This transaction will involve 455,811 Class B units at $39.49 per unit. The Board of Directors approved these terms following a recommendation from its conflicts committee, which comprises independent directors. These developments reflect the company’s ongoing strategic financial maneuvers and operational outcomes.
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