Natural gas gatherer, Equitrans Midstream Corporation (ETRN), paid a quarterly cash dividend of $0.15 per common share on February 14, 2022. However, it reported disappointing fourth-quarter results, with an adjusted loss of $0.07 per share versus the consensus earnings estimate of $0.11 per share. Also, the company missed the consensus EPS estimates in the trailing four quarters.

The stock has lost 15.5% over the past month and 29.8% over the past three months. In addition, it is currently trading 41% below its 52-week high of $11.52, which it hit on October 15, 2021. ETRN did not provide 2022 guidance for net income, adjusted EBITDA, and deferred revenue as its plans to complete the Mountain Valley Pipeline were derailed from its timeline after several court rulings. So, ETRN’s near-term prospects look uncertain.

Here’s what could influence ETRN’s performance in the upcoming months:

Favorable Analyst Estimates

For fiscal 2022, analysts expect ETRN’s EPS and revenue to grow 94.7% and 9.2% year-over-year to $0.74 and $1.44 billion, respectively. Moreover, Wall Street analysts expect the stock to hit $8.38 in the near term, indicating a potential upside of 27.7%.

Poor Financials

ETRN’s operating revenues decreased 32.8% year-over-year to $246.67 million in the fourth quarter, which ended December 31, 2021. The company’s operating income declined 57.7% year-over-year to $87.48 million. Its net loss came in at $1.57 billion, compared to an income of $136.59 million in the prior-year quarter. Also, its loss per share came in at $3.68 compared to an EPS of $0.27 in the year-ago period.

Stretched Valuation

In terms of forward EV/S, ETRN’s 7.23x is 187% higher than the industry average of 2.52x. Likewise, its forward EV/EBITDA of 9.63x is 30.6% higher than the industry average of 7.37x. Moreover, the stock’s forward P/S and EV/EBIT of 1.86x and 12.73x are higher than the industry averages of 1.55x and 11.27x, respectively.

Lower-Than-Industry Profitability

In terms of the trailing-12-month asset turnover ratio, ETRN’s 0.11% is 75.8% lower than the industry average of 0.46%. Likewise, its trailing-12-month ROTC of 3.74% is 10.8% lower than the industry average of 4.19%. Moreover, the stock’s trailing-12-month ROCE, ROTA, and net income margin are negative compared to the industry averages of 8.01%, 2.61%, and 5.61%, respectively.

POWR Ratings Reflect Uncertainty

ETRN has an overall rating of C, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. ETRN has a C grade for Stability, in sync with its beta of 2.10.

ETRN also has a C grade for Value, in sync with its higher-than-industry valuation ratios. In addition, the stock has a C grade for Quality, in sync with its lower-than-industry profitability ratios.

ETRN is ranked #70 out of 82 stocks in the Energy – Oil & Gas industry. Click here to access ETRN’s ratings for Growth, Sentiment, and Momentum as well.

Bottom Line

ETRN is currently trading below its 50-day and 200-day moving averages of $8.86 and $9.26, respectively, indicating a downtrend. As its lofty valuation and lower-than-industry profitability make the stock’s near-term prospects uncertain, it could be wise to wait for a better entry point in the stock.

How Does Halliburton (HAL) Stack Up Against its Peers?

While HAL has an overall POWR Rating of C, you might want to consider investing in the following Energy – Oil & Gas stocks with an A (Strong Buy) or B (Buy) rating: VAALCO Energy, Inc. (EGY), California Resources Corporation (CRC), and SilverBow Resources, Inc. (SBOW).

ETRN shares were trading at $6.73 per share on Wednesday afternoon, up $0.28 (+4.34%). Year-to-date, ETRN has declined -33.68%, versus a -7.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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