Hess Midstream Expects Net Income Annual Growth of Approximately 5% from 2026 to 2028
The company said, "Supported by a combination of growth in physical volumes across gas systems, higher average tariff rates and lower capital spending from 2026 through 2028, Hess Midstream expects net income and Adjusted EBITDA annualized growth of approximately 5% through 2028 from 2026 levels. Gas processing and gathering is expected to represent approximately 75% of total affiliate revenues in 2026 and 2027, excluding pass-through revenues. Gross Adjusted EBITDA Margin is targeted to be approximately 75% from 2026 through 2028. Hess Midstream expects to start paying income taxes in 2026. Hess Midstream expects capital expenditures of less than $75 million a year in each of 2027 and 2028, significantly lower compared with 2026 levels. This includes ongoing capital expenditures focused on the interconnection of Chevron and third-party gas, oil, water volumes and maintenance. Hess Midstream expects Adjusted Free Cash Flow annualized growth of approximately 10% through 2028 from 2026 levels, which is expected to be more than sufficient to fully fund targeted distribution growth. Hess Midstream expects approximately 1.5% annualized growth in gas throughput volumes and relatively flat oil throughput volumes from 2026 through 2028, consistent with Chevron's plans to maintain production at approximately 200,000 barrels of oil equivalent per day and Hess Midstream maintaining third party volumes at 10% of total throughput on average across oil and gas volumes. Hess Midstream is targeting annual distribution per Class A share growth of at least 5% through 2028, expected to be fully funded from Adjusted Free Cash Flow and expects to generate approximately $1 billion of Adjusted Free Cash Flow after Distributions through 2028 that is expected to be available for incremental shareholder returns and debt repayment. Hess Midstream continues to prioritize financial strength and expects its long-term leverage to decrease below 3x Adjusted EBITDA."
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Hess Midstream Partners Q4 Earnings Preview and Analysis
- Earnings Announcement Date: Hess Midstream Partners is set to announce its Q4 earnings on February 2 before market open, with consensus EPS estimate at $0.72 and revenue forecasted at $416.44 million, reflecting a 5.2% year-over-year growth.
- Earnings Estimate Changes: Over the past three months, EPS estimates have seen no upward revisions and seven downward adjustments, while revenue estimates experienced one upward revision and three downward revisions, indicating a cautious market sentiment regarding the company's profitability.
- Dividend Appeal: The 8.8% dividend offered by Hess Midstream has drawn investor interest, although analysts caution about potential risks, particularly as the company pivots its capital spending plan to target a 5% annual distribution growth through 2027.
- Financial Performance: Hess Midstream recently reported a GAAP EPS of $0.75, beating estimates by $0.06, and revenue of $420.9 million, exceeding expectations by $2.98 million, demonstrating the company's resilience in the current market environment.
Energy Midstream Firms Show Significant Dividend Growth
- Delek Logistics Dividend Increase: Delek Logistics Partners declared a quarterly distribution of $1.125 per unit, a 0.4% increase from the previous quarter, extending its distribution growth streak to 52 consecutive quarters with a current yield of 9%, reflecting stable cash flows and financial flexibility.
- Hess Midstream Steady Growth: Hess Midstream's quarterly cash distribution is $0.7641 per share, a 1.2% increase from the prior quarter, with a cumulative dividend growth of 65% since 2021, and an expected annual increase of at least 5% through 2028, ensuring predictable cash flows.
- Plains All American Dividend Boost: Plains All American Pipeline announced a quarterly distribution of $0.4175 per unit, a 10% increase from its prior level, with a compound annual growth rate of 21% over the last four years, currently yielding 8.5%, demonstrating financial flexibility and ongoing investment capacity.
- High Yields Attract Investors: With yields between 8% and 9%, Delek Logistics, Hess Midstream, and Plains All American Pipeline regularly increase their payouts, making them appealing options for investors seeking stable passive income streams.
