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EQT Corp (EQT) Stock Surges 65.7% YTD: What's Driving It?

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EQT Corporation (EQT - Free Report) has gained 65.7% in the year-to-date period compared with 28.7% growth of the composite stocks belonging to the industry.

The company, currently carrying a Zacks Rank #3 (Hold), has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days.

 

Zacks Investment Research
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What's Favoring the Stock?

EQT Corp is a pure-play Appalachian explorer. It is one of the largest natural gas producers in the United States. As the price of natural gas has skyrocketed over the past few months, the company is well-positioned to capitalize on the rising commodity price.

EQT Corp has a massive inventory of drilling locations in the core Appalachian Basin, which could provide significant production volumes. At 2021-end, the company had total proved reserves of 25 trillion cubic feet equivalent (Tcfe), up 26% from the 2020 levels of 19.8 Tcfe.

EQT Corp is uniquely positioned to take an active role in addressing climate change. Being a leading natural gas producer, the firm emits lower greenhouse gases compared with major oil-producing companies. Of the total GHG emission reductions in the United States since 2005, the contribution of EQT is roughly 5%. By 2025, it aims to achieve net zero Scope 1 and Scope 2 emissions.

The upstream energy player has lower exposure to debt capital than composite stocks belonging to the industry. EQT Corp raised its 2023 year-end debt reduction target to $4 billion from $2.5 billion. Hence, the company can rely on its strong balance sheet to sail through the volatility in commodity prices.

Apart from accelerating the reduction of its debt load, EQT is focused on generating strong free cash flows and rewarding its shareholders. The company doubled its 2022-2023 share buyback program to $2 billion. The firm is anticipating generating more than $5.6 billion of free cash flow through 2023 from 2022. As the scope of free cash flow generation looks promising, EQT is expecting ample room to reward shareholders with dividend hikes.

Risks

EQT Corp’s lack of geographic diversification is concerning since the majority of its asset base is located in the Appalachian Basin. As such, it is more vulnerable to basin-specific delays and interruptions in production from wells, which can potentially hamper growth.

Key Picks

Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MPLX LP (MPLX - Free Report) is a master limited partnership that provides a wide range of midstream energy services, including fuel distribution solutions. MPLX’s third-quarter earnings of 96 cents per unit beat the Zacks Consensus Estimate of 81 cents.

MPLX is expected to see an earnings rise of 29.7% in 2022. MPLX’s distribution per unit was 77.5 cents for the third quarter, indicating a 10% hike from the prior distribution of 70.5 cents.

Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. MUSA’s third-quarter 2022 earnings per share of $9.28 beat the Zacks Consensus Estimate of $7.82.

Murphy USA is expected to see an earnings surge of 80.9% in 2022. In more good news for investors, MUSA’s board of directors recently declared a quarterly cash dividend of 35 cents per share to its common shareholders, marking a 9% sequential increase.

Phillips 66 (PSX - Free Report) is the leading player in each of its operations, like refining, chemicals and midstream, in terms of size, efficiency and strengths. PSX’s third-quarter 2022 adjusted earnings per share of $6.46 beat the Zacks Consensus Estimate of $4.98.

PSX is expected to see an earnings rise of 251% in 2022. Phillips 66’s board of directors authorized a $5-billion increase to its stock repurchase program, bringing the total share repurchases authorized since 2012 to $20 billion. This reflects Phillips 66’s strong focus on returning capital to stockholders.


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