Stifel analyst Selman Akyol upgraded DT Midstream, Inc. (NYSE:DTM) to Buy from Hold and raised the price target to $106 from $89.
The analyst sees the recent stock pullback as an attractive opportunity for investors. With its announced natural gas pipeline acquisition, DTM is positioning itself as a leader in natural gas infrastructure.
The acquisition will push DTM's EBITDA beyond $1 billion and diversify its customer base, increasing the likelihood of an upgrade to investment grade by S&P, adds the analyst.
The analyst assumes DTM will close the pipeline acquisition at the beginning of 2025, with the assets generating a 10.5x EBITDA multiple, or approximately $115 million.
As a result, Pipeline EBITDA will now account for about 66% of the analyst's 2025 EBITDA estimate, up from the previous estimate of 62%.
While Akyol expects year-end 2025 leverage to increase to 3.7x from 3.4x, they view this as manageable given the highly contracted nature of the acquired assets.
Additionally, the analyst anticipates free cash flow after dividends to rise to approximately $240 million, up from $195 million.
Investors can gain exposure to DTM via Invesco S&P Spin-Off ETF (NYSE:CSD) and Alerian Energy Infrastructure ETF (NYSE:ENFR).
Price Action: DTM shares are up 3.31% at $98.53 at the last check Thursday.
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