HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION EQT Midstream Partners, LP provides natural gas transmission, storage, and gathering services in Pennsylvania, West Virginia, and Ohio. The company owns, operates, acquires, and develops midstream assets in the Appalachian Basin. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change -4.07 1.10-3.77 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 17.20 13.88 24.28 Net Income 6.94 8.93 34.93 EPS 4.06 1.35 20.68 RETURN ON EQUITY (%) Ind Avg S&P 500 Q3 2017 26.60 12.67 13.41 Q3 2016 26.69-4.03 11.79 Q3 2015 33.42 6.44 12.91 P/E COMPARISON 13.89 EPS ANALYSIS¹ ($) 233.52 Ind Avg 25.50 S&P 500 Sector: Energy Sub-Industry: Oil & Gas Storage & Transportation Source: S&P RATING SINCE 07/20/2017 TARGET PRICE $83.75 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History Volume in Millions 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History TARGET PRICE $83.75 RECOMMENDATION We rate () a. This is driven by some important positives, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor nesses, we feel they are unlikely to have a significant impact on results. HIGHLIGHTS Despite its growing revenue, the company underperformed as compared with the industry average of 24.6%. Since the same quarter one year prior, revenues rose by 17.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. The gross profit margin for is currently very high, coming in at 80.96%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 68.98% significantly outperformed against the industry average. Net operating cash flow has significantly increased by 57.26% to $159.90 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.60%. 84 82 80 78 76 74 72 70 68 66 64 4 2 0 Q1 1.18 Q2 1.12 Q3 1.12 2015 Q4 1.26 Q1 1.39 Q2 1.27 Q3 1.23 2016 NA = not available NM = not meaningful Q4 1.31 Q1 1.36 Q2 1.27 Q3 1.28 2017 1 Compustat fiscal year convention is used for all fundamental data items. 's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, increased its bottom line by earning $5.20 versus $4.68 in the prior year. This year, the market expects an improvement in earnings ($5.39 versus $5.20). The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a debt-to-equity ratio, its quick ratio of 0.84 is somewhat and could be cause for future problems. Report Date: PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -5% 35% UNFAVORABLE 0% DCP EBITDA Margin (TTM) WES WGP ENBL BPL AM PSXP FAVORABLE EEP SHLX TCP 90% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $3.8 Billion and $8.1 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -5% 35% DCP UNFAVORABLE 1% WES Earnings Yield (TTM) AM WGP PSXP FAVORABLE EEP TCP SHLX ENBL BPL Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -1.3% and 30.6%. Companies with NA or NM values do not appear. 8% INDUSTRY ANALYSIS The Oil, Gas & Consumable Fuels industry is cyclical in nature and is one of the most important globally because it touches so many others. It is broken down into its component parts by the nature of activity performed. Upstream activities are related to finding and producing commodities; midstream refers to the transportation of product from the wellhead to intermediate customers; and, downstream includes the refining, transformation and marketing of related products. Coal producers are integrated, much like the players in alternative fuels like uranium. Some of the largest players in the industry are the integrated oil & gas producers (aka Big Oil). Close to two-thirds of the world s energyneeds are satisfied by hydrocarbons (crude oil and natural gas). Althoughconservation, increased efficiency and substitutes are gaining in prominence,they are not likely to significantly reduce this dependence in the near future.crude oil prices have moderated at present due to lagging economies and newsupplies coming online. In 2004, West Texas Intermediate (WTI) crude oil brokeout of its historic trading range of $10 to $40 per barrel on a steady climb tomore than $145 per barrel in June 2008 before crashing to under $40 by the endof 2008. Since then the price of spot crude has climbed back near the $90 to$110 range before falling again. Natural gas prices, responding to excesssupply, have retreated to the $2 to $4 range per million BTU (British thermalunit). Coal prices are dependent on the energy content of the type of coalconsidered and its location, but it, too, has climbed significantly over thepast few years. Following nearly 20 years of underinvestment,the supply of crude oil is now keeping pace with slackening demand. Longer term demandshould grow at about 1.8% per year, meaning it is expected to grow more than40% over the next 20 years. Natural gas demand is expected to rise over time,according to the American Petroleum Institute, as its cleaner-burningproperties increase in value for industry. Coal consumption is projected togrow at about 1.7% per year over the next 20 years, based on US EnergyInformation Administration forecasts. Analysis of companies in this industry beginsby forming a view of the global economy and geopolitics, which is combined witha supply and demand analysis that leads to commodity price forecasts. At theindividual firm level, how efficiently a company operates goes a long way indetermining its profitability. Supply management is an important factor, too,as high commodity prices are affected by how much supply the industry as awhole produces. Geographic positioning can also be important, as regionaleconomic cycles may not synch up well with each other. The so-called supermajor integrated oilcompanies include Exxon Mobil (XOM), BP Plc (BP), Chevron (CVX), Total SA(TOT), and ConocoPhillips (COP). Some of the other major Exploration &Production firms include Anadarko Petroleum (APC), DevonEnergy (DVN) and Apache (APA). On the Refining & Marketing level, majorplayers include Valero Energy (VLO), Sunoco (SUN), and Tesoro (TSO). The majoruranium producer is Cameco (CCJ). PEER GROUP: Oil, Gas & Consumable Fuels Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) EQT MIDSTREAM PARTNERS L 72.51 5,843 13.89 804.60 560.97 WGP WESTERN GAS EQUITY PRTNRS LP 36.84 8,065 22.33 2,127.16 360.78 WES WESTERN GAS PARTNERS LP 48.00 7,325 39.02 2,127.16 561.85 BPL BUCKEYE PARTNERS LP 48.92 7,174 14.96 3,626.15 460.15 ENBL ENABLE MIDSTREAM PARTNERS L 14.72 6,367 17.52 2,611.00 396.00 PSXP PHILLIPS 66 PARTNERS LP 50.04 6,083 21.11 797.00 401.00 AM ANTERO MIDSTREAM PARTNERS 29.34 5,476 20.38 725.16 316.51 DCP DCP MIDSTREAM LP 37.18 5,328 52.37 6,528.00 244.00 SHLX SHELL MIDSTREAM PARTNERS LP 28.16 5,288 22.17 341.20 281.40 EEP ENBRIDGE ENERGY PRTNRS -LP 14.59 4,764 19.99 3,068.40 392.70 TCP TC PIPELINES LP 53.75 3,756 17.39 404.00 245.00 The peer group comparison is based on Major Oil & Gas Storage & Transportation companies of comparable size. Report Date: PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION EQT Midstream Partners, LP provides natural gas transmission, storage, and gathering services in Pennsylvania, West Virginia, and Ohio. The company owns, operates, acquires, and develops midstream assets in the Appalachian Basin. As of December 31, 2016, it had 13.5 trillion cubic feet of natural gas equivalents of proved natural gas, natural gas liquids, and crude oil reserves. The company also owned approximately 300 miles of high pressure gathering lines and 1,500 miles of federal energy regulatory commission (FERC) regulated low pressure gathering lines; and approximately 950 miles of FERC regulated interstate pipelines. It serves local distribution companies, marketers, producers, and commercial and industrial users. EQT Midstream Services, LLC serves as the general partner of the company. EQT Midstream Partners, LP is headquartered in Pittsburgh, Pennsylvania. 625 Liberty Avenue, Suite 1700 Pittsburgh, PA 15222 USA Phone: 412-553-5700 Fax: 412-553-7700 http://www.eqtmidstreampartners.com STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 5.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 90% of the stocks we rate. Total Return 2.0 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 30% of the companies we cover. Efficiency 5.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. Price volatility 1.5 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 20% of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 5.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 90% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. Report Date: PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2017 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry. has liquidity. Currently, the Quick Ratio is 0.84 which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the same period last year, indicating improving cash flow. 1.47 Q4 FY17 5.39 E 2017(E) 5.50 E 2018(E) During the same period, stockholders' equity ("net worth") has increased by 9.30% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future. INCOME STATEMENT Net Sales ($mil) 207.19 176.77 EBITDA ($mil) 167.75 140.85 EBIT ($mil) 145.51 126.21 Net Income ($mil) 142.94 133.66 STOCKS TO : TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. BALANCE SHEET Cash & Equiv. ($mil) 5.08 0.00 Total Assets ($mil) 3,347.43 2,829.49 Total Debt ($mil) 1,091.95 786.72 Equity ($mil) 2,108.16 1,928.72 PROFITABILITY Gross Profit Margin 80.96% 79.68% EBITDA Margin 80.96% 79.67% Operating Margin 70.23% 71.40% Sales Turnover 0.24 0.25 Return on Assets 16.75% 18.19% Return on Equity 26.60% 26.69% DEBT Current Ratio 0.90 0.49 Debt/Capital 0.34 0.29 Interest Expense 9.43 2.80 Interest Coverage 15.44 45.04 SHARE DATA Shares outstanding (mil) 81 81 Div / share 0.94 0.78 EPS 1.28 1.23 Book value / share 26.16 23.93 Institutional Own % NA NA Avg Daily Volume 279,525 250,868 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. Report Date: PAGE 4
RATINGS HISTORY Our rating for has not changed since 7/20/2017. As of 12/14/2017, the stock was trading at a price of which is 12.6% below its 52-week high of $82.99 and 12.6% above its 52-week low of $64.42. 2 Year Chart : $63.67 2016 : $76.29 $85 $80 $75 $70 MOST RECENT RATINGS CHANGES Date Price Action From To 7/20/17 $76.29 Upgrade Hold Buy 6/16/17 $69.93 Downgrade Buy Hold 12/14/15 $63.67 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/14/2017) 44.62% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 30.32% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 25.06% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION. 's P/E ratio indicates a significant discount compared to an average of 233.52 for the Oil, Gas & Consumable Fuels industry and a significant discount compared to the S&P 500 average of 25.50. To use another comparison, its price-to-book ratio of 2.77 indicates a discount versus the S&P 500 average of 3.24 and a significant discount versus the industry average of 5.10. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 13.89 Peers 233.52 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. Price/Projected Earnings 13.18 Peers 30.79 Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. Price/Book 2.77 Peers 5.10 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. Price/Sales 7.26 Peers 2.12 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant premium to its industry. DISCLAIMER: Price/CashFlow 9.02 Peers 9.88 Average. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a valuation on par to its peers. Price to Earnings/Growth 4.15 Peers 1.05 Premium. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant premium to its peers. Earnings Growth lower higher 1.35 Peers 152.89 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 13.88 Peers 26.93 Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. Report Date: PAGE 5