Barclays starts EQT at "overweight," citing sub-$2/Mcf breakeven by 2028

Barclays initiated "overweight" coverage on EQT Corporation with a $65 price target, representing a 17.5% upside, citing the company's strategic reintegration with Equitrans Midstream and subsequent cost reductions. The brokerage forecasts EQT's corporate free cash flow breakeven to drop below $2/Mcf by 2028 and projects free cash flow to reach $4.2 billion by 2026, underpinned by significant debt reduction ($5.6 billion in 2024, targeting net cash by 2028) and new long-term gas sales agreements. This strong financial trajectory and strategic positioning are expected to enable EQT to capitalize on gas price volatility while maintaining downside protection, despite current valuation multiples trading slightly above peers.

Analysis

Barclays has initiated coverage on EQT Corporation with an "overweight" rating and a $65 price target, signaling a potential 17.5% upside from its recent closing price. The bullish thesis is anchored in the strategic reintegration with Equitrans Midstream (ETRN), which, despite adding $7.6 billion in debt, is expected to significantly lower costs and provide critical infrastructure control. This integration is a key driver behind the forecast reduction in EQT's corporate free cash flow breakeven from an estimated $2.31/Mcf in 2025 to below $2.00/Mcf by 2028. The company's financial position is strengthening through aggressive deleveraging, having already cut net debt by $5.6 billion in 2024 with a clear trajectory to fall below $5 billion by year-end 2026 and achieve a net cash position by 2028. This financial discipline underpins robust free cash flow projections of $2.6 billion in 2025 and $4.2 billion in 2026. Future growth is further supported by new long-term contracts, such as the two deals on the Mountain Valley Pipeline poised to add $600 million in annual free cash flow starting in 2027. While EQT currently trades at a slight premium to peers on a 2026 EV/EBITDX basis (6.0x vs. 5.5x), Barclays' price target is supported by a blended valuation that includes a net asset value of $59 per share.

Key Decisions for Investors

• Investors could view the strong free cash flow projections and clear deleveraging pathway as a compelling reason to align with Barclays' 'overweight' rating, particularly if they are bullish on long-term natural gas prices.
• It is crucial to monitor EQT's execution on its debt reduction plan and its ability to achieve the projected free cash flow breakeven targets, as these are foundational to the investment thesis.
• The resumption of share buybacks should be watched as a key future catalyst, signaling that management has successfully achieved its near-term deleveraging goals and is confident in the company's cash generation capabilities.
• While the growth story is strong, investors should weigh the stock's current valuation premium against peer averages and consider the inherent risk tied to commodity price assumptions, specifically the projected gas prices of $3.84/Mcf for 2025 and $4.50/Mcf for 2026.