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EQT Corp (EQT) Stock Spikes Above 7% YTD: What's Driving It?

EQT Corporation EQT has gained 7.5% in the year-to-date period against the 10.5% decline of the composite stocks belonging to the industry.

The company, currently carrying a Zacks Rank #3 (Hold), has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

What's Favoring the Stock?

EQT Corp is a pure-play Appalachian explorer and one of the largest natural gas producers in the United States. The company has a massive inventory of drilling locations in the core Appalachian Basin, which can provide significant production volumes.

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At 2022-end, the company had total proved reserves of 25 trillion cubic feet equivalent (Tcfe), up marginally from the 2021 levels. Through 2022, the company produced 1,940,043 million cubic feet equivalent of natural gas. Of the total volumes, natural gas comprises almost 94%.

EQT Corp is uniquely positioned to take an active role in addressing climate change. The firm emits lower greenhouse gases than the major oil-producing companies. Of the total GHG emission reductions in the United States since 2005, the contribution of EQT is roughly 5%. It aims to achieve net-zero Scope 1 and Scope 2 by 2025.

The upstream energy player has lower exposure to debt capital than composite stocks belonging to the industry. EQT Corp raised its 2023 year-end debt reduction target to $4 billion from $2.5 billion. Hence, the company can rely on its strong balance sheet to sail through the volatility in commodity prices.

Apart from accelerating the reduction of its debt load, EQT is focused on generating strong free cash flows and rewarding its shareholders. The company doubled its 2022-2023 share buyback program to $2 billion.

EQT Corp expects to generate more than $5.6 billion of free cash flow through 2023 from 2022. As the scope of free cash flow generation looks promising, EQT is expecting ample room to reward shareholders with dividend hikes.

Risks

EQT Corp’s lack of geographic diversification is concerning since the majority of its asset base is located in the Appalachian Basin. As such, it is more vulnerable to basin-specific delays and interruptions in production from wells, which can potentially hamper growth.

Key Picks

Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enterprise Products Partners LP EPD reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.

In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded a distributable cash flow of $863 million in the same time frame.

Dril-Quip, Inc. DRQ reported a first-quarter 2023 adjusted loss of 1 cent per share, narrower than the Zacks Consensus Estimate of a loss of 2 cents. This was due to improved performances of key offshore markets and some reemerging areas.

For 2023, Dril-Quip expects product booking growth of 10-20%. The company reported net bookings of $53.5 million for the first quarter. Backlog rose 6% year over year due to an increase in product bookings following improved market conditions.

Murphy USA Inc. MUSA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the motor fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

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Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report

Dril-Quip, Inc. (DRQ) : Free Stock Analysis Report

EQT Corporation (EQT) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

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