Headquartered in Denver, Colorado, Antero Midstream Corporation (AM) owns, operates, and develops midstream energy infrastructure. It operates through two segments, Gathering and Processing, and Water Handling. AM was created by Antero Resources Corporation (AR) to support its natural gas and NGL production in the Appalachian Basin.

Despite surpassing analysts’ revenue estimates in its most recent quarter, AM’s performance declined on a year-over-year basis. The stock has slumped 14.4% in price since the company posted its third-quarter results on October 27. Investors were anxious about pandemic-related disruptions and the company’s report of lower gathering and freshwater delivery volumes. Its low-pressure gathering volumes decreased 6% year-over-year, while its high-pressure gathering volumes declined 7% year-over-year. In addition, compression was down 3% from the same period last year. AM cited downtime at its Sherwood and Hopedale processing and fractionation facilities during the quarter as having negatively impacted the gathering and compression volumes. Its freshwater delivery volumes also declined 18% from the prior-year quarter to 91 MBbl/d.

AM’s shares have declined 8.9% in price over the past six months and 10.8% over the past month to close the last trading session at $9.46. The stock is now trading below its 50-day and 200-day moving average. Also, AM’s stock is highly volatile at its current price level with a 2.90 beta.

Here is what could shape AM’s performance in the near term:

Mixed Valuation

In terms of forward Price/Sales, AM is currently trading at 4.96x, which is 275.3% higher than the 1.32x industry average. Also, its 8.31 forward EV/Sales ratio is 254.4% higher than the 2.34 industry average.

However, AM’s trailing-12-month P/E is 15.1% lower than the 16.05x industry average. and its forward EV/EBIT is 14.7% lower than the 12.34x industry average.

Bleak Third-Quarter Earnings Report

AM’s total revenues declined 3.7% year-over-year to $224.80 million in its fiscal third quarter, ended September 30. Its operating income stood at $141.82 million, down 6.6% from the same period last year. Its net income and comprehensive income declined 15.3% from their year-ago value to $89.33 million. And the company’s EPS decreased 13.6% year-over-year to $0.19. In addition, AM had no cash and cash equivalents at the end of the period.

Higher-Than-Industry Profit Margins

AM’s 83.80% gross profit margin is 115.6% higher than the 38.88% industry average. Also, its 77.05% EBITDA margin is 267.4% higher than the 20.97% industry average.

Furthermore,  AM’s 13.71%, 5.95%, and 6.33% respective ROE, ROA, and ROTC are 391.5%, 476.99%, and 80.16% higher than the industry averages.

POWR Ratings Reflect Uncertain Prospects

AM has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of C for Value, which is consistent with its mixed valuation.

AM has a D grade for Growth, which is in sync with its decline in earnings in its last reported quarter.

Of the 36 stocks in the MLPs - Oil & Gas industry, AM is ranked #32.

Beyond what I have stated above, one can also view AM’s grades for Quality, Sentiment, Momentum, and Stability here.

View the top-rated stocks in the MLPs - Oil & Gas industry here.

Bottom Line

AM reported declining operational activities in its gathering and compression segment in the third quarter. Also, the company reported lower freshwater delivery volumes. The company’s top-line and bottom-line results were also disappointing. Furthermore, its shares are trading below their 50-day and 200-day moving averages, indicating a downtrend. Also, given its high beta value, we think it could be wise to wait for a better entry point in the stock.

How Does Antero Midstream Corporation (AM) Stack Up Against its Peers?

While AM has an overall POWR Rating of C, one  might want to consider looking at its industry peer, Star Group L.P. (SGU), which has an A (Strong Buy) rating.

AM shares fell $0.05 (-0.53%) in premarket trading Friday. Year-to-date, AM has gained 36.39%, versus a 25.98% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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