Hess Midstream stock reinstated at Neutral by Goldman Sachs

Goldman Sachs reinstated coverage on Hess Midstream (HESM) with a Neutral rating and a $36.00 price target, citing that shares are fully valued due to revised growth expectations. This follows Chevron's decision to reduce Bakken drilling operations, prompting HESM to project flat Adjusted EBITDA in 2026 before growth resumes in 2027. Wells Fargo and UBS also downgraded the stock, reflecting concerns over future earnings prospects tied to reduced activity. Despite strong underlying fundamentals and an 8.5% dividend yield, HESM has underperformed, trading near its 52-week low as the market assesses the impact of these operational shifts.

Analysis

Hess Midstream Partners (HESM) is facing significant headwinds following its acquisition by sponsor Chevron, resulting in multiple analyst downgrades and a reset of growth expectations. Goldman Sachs has reinstated coverage with a Neutral rating and a $36 price target, deeming the shares fully valued. This sentiment is echoed by recent downgrades from Wells Fargo and UBS. The primary catalyst is Chevron's decision to reduce its Bakken rig count, which has compelled HESM to guide for relatively flat Adjusted EBITDA in 2026 before growth resumes in 2027. This news has driven HESM's stock down 9% since mid-July, underperforming the Alerian Midstream Index by 14 percentage points and pushing the price near its 52-week low. Despite the negative outlook on growth, the company exhibits strong underlying fundamentals, including a P/E ratio of 12.86, a robust 8.5% dividend yield with an 8-year history of increases, and recent 9% revenue growth. The core conflict for investors is weighing these strong shareholder returns and contractual protections against the pronounced uncertainty of its medium-term growth profile, which is now contingent on Chevron's ongoing, and as yet undecided, review of its Bakken strategy.

Key Decisions for Investors

• Income-focused investors should weigh the attractive 8.5% dividend yield, supported by a history of raises and low capital needs, against the risk of share price stagnation due to the revised, flatter growth outlook for 2026.
• Investors should re-evaluate HESM's position as a growth-oriented midstream asset, given the company's own guidance for flat EBITDA in 2026 and analyst consensus that current estimates may still be too high.
• Closely monitor any future announcements from Chevron regarding its Bakken operational review, as this presents the primary catalyst for both upside and downside risk to HESM's long-term earnings trajectory.
• Given that the stock is trading near its 52-week low yet is considered 'fully valued' by multiple analysts, it may be prudent to await more clarity on 2027 growth drivers or a more attractive valuation before initiating or adding to long positions.