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Here's Why Hold Strategy is Apt for DCP Midstream (DCP) Stock
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DCP Midstream, LP has gained 16.5% in the past six months compared with 4.8% growth of the composite stocks belonging to the industry.
The company, with a Zacks Rank #3 (Hold) at present, beat the Zacks Consensus Estimate thrice and missed the same once in the prior four quarters, the average surprise being 26.2%.
Image Source: Zacks Investment Research
What’s Favoring the Stock?
DCP is one of the leading natural gas liquid producers and marketers in the United States. The partnership’s business model is designed to earn stable fee-based revenues from key midstream assets being utilized by shippers and customers over a long period.
DCP’s massive network of 51,000 miles of pipeline infrastructure provides clients with intricate connectivity. The midstream energy player’s 36 natural gas processing plants fetch high cash flow. DCP recently acquired the James Lake natural gas gathering and processing assets, expanding its presence in the Permian Basin oil and gas fields.
The partnership’s ability to generate free cash flow from operations is impressive. In 2022, DCP generated $615 million of excess free cash flow, which is about 23% higher than the 2021-end levels. This reflects the firm’s tremendous strength in operations and makes it well-positioned to pay dividends, reduce debt and contribute to growth.
The midstream player is gaining from resilient earnings from its diversified portfolio, having low exposure to volatile commodity prices. The partnership strongly focuses on strengthening its balance sheet with the foremost priority of reducing debt load. For the year ended Dec 31, 2022, the partnership reduced about $570 million in absolute debt.
Antero Midstream Corporation (AM - Free Report) reported fourth-quarter 2022 adjusted earnings per share of 20 cents, beating the Zacks Consensus Estimate of 17 cents. The strong quarterly results were primarily driven by higher freshwater delivery volumes and increased average freshwater distribution fees.
For 2023, Antero Midstream expects a net income of $340-$380 million, indicating an increase from the $326.2 million reported in 2022.
Liberty Energy Inc. (LBRT - Free Report) announced fourth-quarter 2022 earnings per share of 82 cents, which handily beat the Zacks Consensus Estimate of 71 cents. The outperformance reflects the impacts of strong execution and increased service pricing.
As part of its shareholder return policy, LBRT repurchased $125 million of its stock at an average price of $15.29 a piece since July and reinstated a quarterly cash dividend of 5 cents in the fourth quarter.
Oceaneering International, Inc.’s (OII - Free Report) fourth-quarter 2022 adjusted profit of 6 cents per share missed the Zacks Consensus Estimate of a profit of 17 cents. The underperformance was due to weaker results in certain segments.
For 2023, Oceaneering projects consolidated EBITDA of $260-$310 million and free cash flow generation of $75-$125 million.
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Here's Why Hold Strategy is Apt for DCP Midstream (DCP) Stock
DCP Midstream, LP has gained 16.5% in the past six months compared with 4.8% growth of the composite stocks belonging to the industry.
The company, with a Zacks Rank #3 (Hold) at present, beat the Zacks Consensus Estimate thrice and missed the same once in the prior four quarters, the average surprise being 26.2%.
Image Source: Zacks Investment Research
What’s Favoring the Stock?
DCP is one of the leading natural gas liquid producers and marketers in the United States. The partnership’s business model is designed to earn stable fee-based revenues from key midstream assets being utilized by shippers and customers over a long period.
DCP’s massive network of 51,000 miles of pipeline infrastructure provides clients with intricate connectivity. The midstream energy player’s 36 natural gas processing plants fetch high cash flow. DCP recently acquired the James Lake natural gas gathering and processing assets, expanding its presence in the Permian Basin oil and gas fields.
The partnership’s ability to generate free cash flow from operations is impressive. In 2022, DCP generated $615 million of excess free cash flow, which is about 23% higher than the 2021-end levels. This reflects the firm’s tremendous strength in operations and makes it well-positioned to pay dividends, reduce debt and contribute to growth.
The midstream player is gaining from resilient earnings from its diversified portfolio, having low exposure to volatile commodity prices. The partnership strongly focuses on strengthening its balance sheet with the foremost priority of reducing debt load. For the year ended Dec 31, 2022, the partnership reduced about $570 million in absolute debt.
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.
Antero Midstream Corporation (AM - Free Report) reported fourth-quarter 2022 adjusted earnings per share of 20 cents, beating the Zacks Consensus Estimate of 17 cents. The strong quarterly results were primarily driven by higher freshwater delivery volumes and increased average freshwater distribution fees.
For 2023, Antero Midstream expects a net income of $340-$380 million, indicating an increase from the $326.2 million reported in 2022.
Liberty Energy Inc. (LBRT - Free Report) announced fourth-quarter 2022 earnings per share of 82 cents, which handily beat the Zacks Consensus Estimate of 71 cents. The outperformance reflects the impacts of strong execution and increased service pricing.
As part of its shareholder return policy, LBRT repurchased $125 million of its stock at an average price of $15.29 a piece since July and reinstated a quarterly cash dividend of 5 cents in the fourth quarter.
Oceaneering International, Inc.’s (OII - Free Report) fourth-quarter 2022 adjusted profit of 6 cents per share missed the Zacks Consensus Estimate of a profit of 17 cents. The underperformance was due to weaker results in certain segments.
For 2023, Oceaneering projects consolidated EBITDA of $260-$310 million and free cash flow generation of $75-$125 million.