Undervalued Stock #2: EQT Midstream Partners LP (EQM)

8EQT Midstream Partners LP (EQM) owns, operates, acquires and develops midstream assets in the Appalachian Basin. Midstream assets include the processing, storing, transporting and marketing of oil, natural gas and natural gas liquids. EQT Midstream operates through two segments: Transmission and Storage, and Gathering Systems.

EQT Midstream’s operations are primarily focused in southwestern Pennsylvania and northern West Virginia, a strategic location in the core of the natural gas shale areas known as the Marcellus and Utica Shales. EQM has become a leading Appalachian Basin midstream energy company.

Sales will likely advance 15% and EPS will rise 7% to $5.68 in 2017. Management expects rapid growth in 2017, which could receive a boost from the Trump administration if pipeline construction restrictions are loosened. With a price to earnings ratio (P/E) of 13.2 times current EPS, EQM shares are clearly undervalued. EQT Midstream raised its quarterly dividend for the 20th consecutive quarter. The raise to $0.89 from $0.85 increases the dividend yield to 4.5%. EQM forecasts 20% growth in its annual per unit distribution for 2017. Buy.

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EQT Midstream Partners (EQM): A top value stock

Top Value Stock: EQT Midstream Partners (EQM: Current Price 74.53) owns, operates, acquires and develops midstream assets in the Appalachian Basin. Midstream assets include the processing, storing, transporting and marketing of oil, natural gas and natural gas liquids. The company was founded in January 2012 and is headquartered in Pittsburgh, Pennsylvania.

EQT Midstream’s operations are primarily focused in southwestern Pennsylvania and northern West Virginia, a strategic location in the core of the natural gas shale areas known as the Marcellus and Utica Shales. This same region is also the primary operating area of EQT Corp., EQM’s general partner and largest customer. EQT Corp. accounts for 73% of EQM’s revenue.

EQT Midstream is expanding access to existing and adjacent markets. Sales will likely advance 16% and EPS will rise 8% to 5.65 in 2017. With a price to earnings ratio (P/E) of 14.1 times current EPS and a dividend yield of 4.8%, EQM shares are clearly undervalued.

EQT Midstream has increased its quarterly dividend 15 times during the past four years. President-elect Trump will likely ease regulations allowing companies to build additional pipelines in the U.S. I expect EQM shares to rise 42% and reach my Min Sell Price of 106.09 within two years. Buy EQM at the current price.

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