BofA Securities has resumed coverage on Plains All American (NASDAQ: PAA) with a Neutral rating and set a price target of $18.00.
In their coverage, BofA Securities highlighted the company’s significant exposure to the Permian Basin, with approximately 60% of its EBITDA originating from gathering and crude pipelines in the region.
The firm noted that Plains All American’s financial performance is closely tied to the growth of the Permian Basin, which could be impacted by fluctuations in prices.
A weaker crude price environment might lead to slower growth in the region, which in turn could affect the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA).
Furthermore, BofA Securities pointed out a potential challenge for Plains All American regarding the re-contracting of its crude pipelines. The firm anticipates that this process could result in an approximate $200 million reduction in revenue from the third quarter of 2025 through 2026. This expected decrease could potentially offset any growth gains, especially if the Permian Basin experiences slower development due to lower oil prices.
In other recent news, Plains All American Pipeline reported a robust Q2 performance in 2024 with an adjusted EBITDA of $674 million, surpassing expectations. This led the company to raise its full-year 2024 EBITDA guidance by $75 million.
In addition, Plains All American Pipeline has made strategic amendments to its credit agreements, extending the maturity dates of its existing credit facilities. Goldman Sachs maintained a Sell rating on the company’s shares, keeping the price target steady at $17.00. The firm’s analysis comes as the market anticipates the company’s third-quarter 2024 earnings, with an EBITDA forecast of $665 million.
On the other hand, Plains GP Holdings (NASDAQ:), a related entity, has entered a promising joint venture with Oryx, a move that Stifel expects to boost the company’s long haul pipelines in the future. Consequently, Stifel upgraded the price target for Plains GP Holdings to $23.00, maintaining a Buy rating.
InvestingPro Insights
To complement BofA Securities’ analysis, recent data from InvestingPro offers additional context on Plains All American’s financial position. The company’s market capitalization stands at $12.25 billion, with a P/E ratio of 15.85, indicating a relatively modest valuation compared to some industry peers. This aligns with BofA’s Neutral rating, suggesting the stock may be fairly priced given its current prospects and challenges.
InvestingPro Tips highlight that Plains All American has raised its dividend for 3 consecutive years, with a current dividend yield of 7.27%. This substantial yield, coupled with an 18.69% dividend growth rate over the last twelve months, may appeal to income-focused investors despite the potential headwinds mentioned in the BofA report.
The company’s revenue for the last twelve months as of Q2 2024 was $49.7 billion, with a quarterly revenue growth of 11.47% in Q2 2024. This growth, despite the challenges in re-contracting crude pipelines noted by BofA, suggests resilience in Plains All American’s operations.
For investors seeking a deeper understanding of Plains All American’s prospects, InvestingPro offers 12 additional tips, providing a more comprehensive view of the company’s financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.