UPDATE: JPMorgan Upgrades Western Gas Partners (WES) to Overweight
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JPMorgan analyst Jeremy Tonet upgraded Western Gas Partners (NYSE: WES) from Neutral to Overweight with a price target of $25.00 (from $17.00).
The analyst comments "WES reported 2020 adj. EBITDA ~3% above the high end of its original pre-COVID-19 guidance, highlighting impressive execution on cost reductions and relative stability afforded from a strong MVC/cost-of-service contractual profile. With 4Q20 results, WES reaffirmed its previous 2021 adj. EBITDA guide of $1,825-$1,925mm. While OXY likely remains disciplined this year despite the rise in commodity prices, activity could tick up in 2022. Moreover, WES expects EBITDA growth in 2022, possibly hinting towards favorable ex-OXY forecasts. Lastly on the OXY front, we believe that OXY improving as a counterparty should continue to drive positive re-rating for WES, as we have seen in sponsored MLPs. Separately, WES appears uniquely positioned to execute on its $250mm buyback program (~$33mm repurchased through 4Q20) and reach ~3.5x by YE22. On valuation, WES screens near the top of the peer group with a 15% 2021 FCF yield and trades cheap on 2022 EV/EBITDA as well. Altogether, we see more room to run and upgrade WES to OW and increase our PT to $25."
Shares of Western Gas Partners closed at $19.66 yesterday.
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