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RBC Highlights Preferred Midstream Names as Earnings Season Approaches
BP's midstream benchmark fell 1.6% over the week ended June 11, but still delivered a 16.4% gain so far this year, outperforming the S&P 500's 8.0% advance, RBC Capital Markets said Friday.The sector also outperformed utilities by 1,314 basis points and real estate investment trusts by 160 basis points this year, although it lagged oilfield services by 3,319 basis points and exploration and production companies by 1,306 basis points, RBC said.Commodity prices weakened during the week, with front-month West Texas Intermediate crude dropping about 6% to roughly $88 per barrel and Henry Hub natural gas falling about 7.5% to $3.09 per million British thermal units, according to RBC.Archrock (AROC) led performance among RBC-covered companies with a 3.7% gain, supported by continued strength in the compression market, while Sunoco (SUN) fell 4.4% as investors likely locked in profits, the firm said.C-corporations gained 0.1%, outperforming master limited partnerships, which declined 1.6%.RBC estimates its coverage universe trades at an average 2027 enterprise value-to-adjusted EBITDA multiple of 10.0x and expects midstream stocks to remain sensitive to Iran-related developments that influence commodity prices.The firm said companies with greater perceived commodity exposure, including Targa Resources (TRGP), ONEOK (OKE), and Kinetik Holdings (KNTK), as well as liquefied natural gas-focused names such as Venture Global (VG) and Cheniere Energy (LNG), could react most sharply to geopolitical headlines.Kinder Morgan will kick off the second-quarter earnings season for RBC's coverage universe on July 22. RBC expects management to discuss geopolitical and macroeconomic conditions, stronger export activity, commodity-price support, and growth opportunities across its project pipeline.Among its preferred investments, RBC highlighted Cheniere Energy, citing 95% contracted cash flows through 2035, a $10 billion share repurchase program, and a target to increase dividends by 10% annually through 2030.RBC said Sunoco can build on operational momentum through 2027, benefiting from stronger refining margins at Burnaby, synergies from the Parkland acquisition, and an additional $500 million bolt-on acquisition strategy.The firm also favors Targa Resources, citing customer-backed expansion projects, exposure to leading Permian Basin acreage, and rising gas-to-oil ratios that could support natural gas growth even if crude production levels off.For Williams Companies (WMB), RBC sees growing electricity demand and natural gas consumption creating opportunities for high-return projects tied to Transco expansions and power-related infrastructure through 2030 and beyond.Williams is targeting adjusted EBITDA compound annual growth of more than 10% through 2030, including roughly 9% growth from Haynesville-related projects, while maintaining a balance sheet capable of supporting further expansion, RBC said.Price: $36.67, Change: $+0.59, Percent Change: +1.65%
$AROC$KMI$KNTK$LNG$OKE$SUN$TRGP$VG$WMB
