Hess Midstream LP(HESM)Earnings, Financials & Key Ratios

Wall Street analysts have one job: predict where companies' earnings are going in the coming quarter. Sounds simple enough, except said suits aren't so good at it!

Hess Midstream LP is transitioning from heavy infrastructure investment to maximizing cash generation and increasing shareholder returns, forming the basis for my Buy rating. HESM's fee-based business model, supported by long-term agreements and minimum volume commitments, underpins dependable cash flows and sustainable distribution growth. Management targets at least 5% annual distribution growth through 2028, alongside disciplined unit repurchases, prudent debt management, and selective acquisitions.

Hess Midstream remains a "Strong Buy," offering an 8.5% yield and at least 15% upside, despite recent underperformance and Bakken drilling headwinds. HESM's long-term contract with Chevron through 2033, with annual CPI-linked fee escalators, secures stable cash flow and mitigates near-term oil price and volume risks. Free cash flow yield stands at ~13%, supported by reduced capex, growing third-party revenues, and robust EBITDA margins of 83%.

There are some highly compelling 8%+ yields available today. I detail 2 of them in this article that are often overlooked, yet have solid balance sheets, promising growth potential, and strong coverage. I also share some of the risks to keep in mind.