Hess Midstream LP Class A Share representing a limited partner Interest
HESM
$33.03
-14.63%
Hess Midstream LP is a fee-based, growth-oriented limited partnership that owns, operates, develops, and acquires midstream assets, providing gathering, compression, processing, fractionation, terminaling, and water disposal services primarily to Chevron Corporation in the Bakken region. As a key infrastructure provider with a fee-based revenue model, it benefits from long-term, volume-based contracts that offer stability and visibility. The current investor narrative centers on the company's ability to sustain distribution growth and generate robust free cash flow, while navigating a high leverage profile and a recent shift in analyst sentiment toward a more cautious stance.…
HESM
Hess Midstream LP Class A Share representing a limited partner Interest
$33.03
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Investment Opinion: Should I buy HESM Today?
Based on the analysis, HESM is rated a Hold. The stock offers a high dividend yield of 8.25% and trades at a low PE of 12x, but the average analyst target of $37.50 is below the current price of $39.91, implying limited upside. The company's fee-based model provides stable cash flows, but its high leverage and dependence on Chevron introduce significant risks that cap the stock's potential.
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HESM 12-Month Price Forecast
The AI assessment is neutral with medium confidence. HESM's high yield and low valuation provide a floor, but the lack of growth catalysts and high leverage limit upside. The stock is likely to trade in a range, with the main risk being a distribution cut if volumes decline. An upgrade to bullish would require evidence of debt reduction and volume growth, while a downgrade to bearish would occur if Chevron signals reduced activity or if the payout ratio exceeds 100%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Hess Midstream LP Class A Share representing a limited partner Interest's 12-month outlook, with a consensus price target around $37.50 and implied upside of +13.5% versus the current price.
Average Target
$37.50
0 analysts
Implied Upside
+13.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$33 - $40
Analyst target range
The target price range spans from a low of $33.00 to a high of $40.00, with the high end just slightly above the current price, suggesting that even the most optimistic analyst sees limited upside. The low target of $33.00 implies a potential downside of -17.3%, which could be based on concerns about the company's high debt levels or a potential slowdown in volume growth. The wide spread between the low and high targets ($7.00) indicates significant uncertainty among analysts, likely due to the company's dependence on Chevron and the cyclical nature of the energy sector. Recent institutional ratings show a pattern of downgrades, with several firms moving from Overweight/Buy to Neutral/Equal Weight, signaling a more cautious stance on the stock's near-term prospects.
Bulls vs Bears: HESM Investment Factors
HESM offers a compelling income story with a high 8.25% yield, stable fee-based cash flows, and a low PE of 12x. However, the stock faces significant risks from its high leverage (D/E 6.64x), extreme customer concentration (96% from Chevron), and limited analyst upside (average target $37.50, below current price). The bear case currently has stronger evidence because the stock is trading near its 52-week high with no meaningful upside catalysts, while the risks of debt and customer dependence are substantial. The central tension is whether HESM's high yield and stable volumes can compensate for its leverage and lack of growth, or if these factors will lead to distribution cuts and multiple compression.
Bullish
- Fee-based revenue with high margins: HESM's gross margin is a robust 86.8%, and operating margin is 62.3%, reflecting the fee-based, low-cost nature of its midstream assets. This provides stable cash flows even if volumes fluctuate, underpinning its distribution coverage.
- Attractive valuation with low PE: The trailing PE is 12.0x and forward PE is 12.9x, which is reasonable for a midstream company. The PEG ratio of 0.84 suggests the stock is undervalued relative to its expected earnings growth, offering a margin of safety.
- High dividend yield supports income investors: With a dividend yield of 8.25% and a payout ratio of 99.2%, HESM offers a substantial income stream. This is particularly appealing in a low-yield environment and provides a floor under the stock price.
- Steady revenue growth from volumes: Revenue grew from $354.7M in Q1 2024 to $404.2M in Q4 2025, a CAGR of about 6.5% annually. The consistent volume growth from Chevron's Bakken operations drives this expansion, supported by long-term contracts.
Bearish
- High leverage and debt burden: Debt-to-equity is a very high 6.64x, and the current ratio is 0.85, indicating potential liquidity stress. Interest expense of $56.7M in Q4 2025 consumes a significant portion of operating income, increasing financial risk.
- Dependence on Chevron for revenue: Affiliate services (primarily Chevron) contributed $388.4M of the $404.2M revenue in Q4 2025, over 96% of total. Any reduction in Chevron's Bakken activity or contract renegotiation could severely impact HESM's cash flows.
- Limited upside per analyst targets: The average analyst target is $37.50, which is 6.0% below the current price of $39.91. Even the high target of $40.00 offers only 0.2% upside, indicating that analysts see the stock as fully valued or overvalued.
- Underperformance relative to market: Over the past year, HESM is down 3.3% while the S&P 500 is up 18.65%, a relative underperformance of nearly 22%. This suggests weak investor sentiment and potential sector rotation away from midstream.
HESM Technical Analysis
HESM's price trend over the past year has been range-bound with a slight negative bias, as the stock is down 3.32% over the last 12 months, underperforming the S&P 500's 18.65% gain. The current price of $39.91 sits at 96.3% of its 52-week range (between $31.63 low and $41.44 high), indicating the stock is near the upper end of its trading band, which suggests a level of resilience but also potential resistance. This positioning near the highs could reflect underlying support from income-focused investors, but it also implies limited upside if the broader market weakens.
Beta
0.56
0.56x market volatility
Max Drawdown
-23.1%
Largest decline past year
52-Week Range
$32-$41
Price range past year
Annual Return
-0.9%
Cumulative gain past year
| Period | HESM Return | S&P 500 |
|---|---|---|
| 1m | -17.2% | +0.9% |
| 3m | -14.8% | +3.4% |
| 6m | -16.5% | +14.4% |
| 1y | -0.9% | +16.2% |
| ytd | -4.7% | +14.0% |
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HESM Fundamental Analysis
Hess Midstream's revenue has shown steady growth, with the most recent quarter (Q4 2025) reporting revenue of $404.2 million, up 2.33% year-over-year, and a sequential increase from $381.0 million in Q1 2025. Over the past eight quarters, revenue has grown from $354.7 million in Q1 2024 to $404.2 million, representing a compound quarterly growth rate of approximately 1.6%, indicating a consistent but moderate expansion. The growth is driven by increased volumes from its affiliate services, which contributed $388.4 million in the latest quarter, while third-party services added $14.7 million, showing the company's reliance on Chevron for the bulk of its revenue.
Quarterly Revenue
$404200000.0B
2025-12
Revenue YoY Growth
+2.3%
YoY Comparison
Gross Margin
63.6%
Latest Quarter
Free Cash Flow
$584800000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is HESM Overvalued?
Given that Hess Midstream is profitable with a trailing net income of $93.3 million in Q4 2025, the PE ratio is the most appropriate valuation metric. The trailing PE stands at 12.02x, while the forward PE is 12.90x, indicating that the market expects earnings to remain relatively stable, with a slight premium for future growth. The gap between trailing and forward PE is minimal, suggesting that analysts do not anticipate significant earnings acceleration, which is consistent with the company's mature, fee-based business model.
PE
12.0x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 12x~16x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
6.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are elevated due to HESM's high leverage, with a debt-to-equity ratio of 6.64x and a current ratio of 0.85, indicating potential difficulty in meeting short-term obligations. Interest expense of $56.7 million in Q4 2025 consumes about 22.5% of operating income, leaving less room for distribution coverage if volumes decline. The payout ratio is 99.2%, meaning almost all net income is distributed, leaving little retained cash for debt reduction or growth investments. Revenue is highly concentrated, with over 96% coming from affiliate Chevron, making the company vulnerable to any reduction in Chevron's Bakken activity or contract renegotiation. Additionally, the recent trend of declining net income from $97.7M in Q3 2025 to $93.3M in Q4 2025, despite stable revenue, suggests margin pressure from higher costs or interest expenses.
FAQ
The key risks of holding HESM are: 1) Financial risk from high leverage (debt-to-equity of 6.64x) and a low current ratio of 0.85, which could lead to liquidity issues if cash flows decline. 2) Customer concentration risk, as over 96% of revenue comes from Chevron, making HESM vulnerable to any reduction in Chevron's Bakken activity. 3) Distribution risk, with a payout ratio of 99%, leaving no room for error; a small drop in earnings could force a cut. 4) Market risk, as the stock has a beta of 0.50, but it has underperformed the S&P 500 by 22% over the past year, indicating negative sentiment. The most severe risk is a distribution cut, which could lead to a 20%+ drop in the stock price.
The 12-month forecast for HESM is neutral to slightly bearish. The bull case (20% probability) sees the stock reaching $40-$42 if Chevron volumes grow and debt is reduced. The base case (55% probability) expects the stock to trade between $37 and $40, supported by the high yield but capped by limited growth. The bear case (25% probability) could see the stock fall to $33-$36 if volumes decline or the distribution is cut. The most likely scenario is the base case, with the stock trading around $38, as the high yield provides a floor but the lack of catalysts limits upside. Investors should monitor Chevron's production guidance and HESM's debt levels for signs of change.
Based on valuation metrics, HESM appears fairly valued to slightly undervalued. The trailing PE of 12.0x is below the midstream sector average of around 15x, and the PEG ratio of 0.84 suggests it is undervalued relative to its growth rate. However, the forward PE of 12.9x is higher than the trailing, indicating that earnings are expected to decline slightly, which is a negative signal. The price-to-sales ratio of 2.63x is reasonable, and the EV/EBITDA of 6.48x is attractive. The market is pricing in stable but low growth, and the high dividend yield of 8.25% compensates for the risks. Overall, the stock is not overvalued, but the limited upside to analyst targets suggests it is close to fair value.
HESM can be a good buy for income-focused investors who can tolerate the risks of high leverage and customer concentration. The stock offers a high dividend yield of 8.25% and trades at a low PE of 12x, providing a potential margin of safety. However, the average analyst target of $37.50 is below the current price of $39.91, implying limited upside, and the stock has underperformed the market by 22% over the past year. The biggest risk is a distribution cut if volumes decline, given the payout ratio is 99%. Therefore, it is a 'hold' for most investors, but a 'buy' for those seeking high yield and willing to accept the risks.
HESM is more suitable for long-term investment, given its high dividend yield and stable fee-based business model. The stock has a beta of 0.50, indicating lower volatility than the market, which appeals to long-term income investors. However, the high payout ratio and leverage make it risky for short-term trading, as any negative news could cause sharp price drops. For long-term investors, a minimum holding period of 3-5 years is recommended to ride out commodity cycles and benefit from distribution growth. The stock's current yield of 8.25% provides a solid income stream, but capital appreciation is likely to be modest. Short-term traders may find limited opportunities due to the stock's low volatility and range-bound trading.