Equitrans Midstream Corp.

ETRN Details

Equitrans Midstream Corp. (NYSE: ETRN) is a midstream service provider in the United States, with customers in Pennsylvania, West Virginia, and Ohio. ETRN is amongst the most significant gas gathering companies in the US (in the Appalachian Basin). The firm operates in three lines of businesses: 1) Gathering system, which consists mainly of dry gas gathering systems with high-pressure gathering lines, 2) Transmission system, which consists of Federal Energy Regulatory Commission (FERC) regulated interstate pipelines and storage facilities. 3) Water Service system, comprising water pipelines, pumping stations, and other measuring facilities that support completing operations and generated water for recycling or disposal.

Quarterly Cash Dividends: ETRN announced a quarterly cash dividend of USD 0.15 per common share and USD 0.4873 per share of Series A Perpetual Convertible Preferred stock on July 23, 2021. The dividends will be paid on August 13, 2021, to shareholders of record as of August 04, 2021.

H1FY21 Results: The company reported a slight decline of 8.24% in operating revenues to USD 728.29 million during H1FY21 (ended June 30, 2021) compared to USD 793.70 million during H1FY20, due to a decline in sales in the Gathering and Water Service segments. As a result, its net income declined to USD 116.72 million during H1FY21 from USD 333.02 million reported in H1FY20. As of June 30, 2021, the company had cash and cash equivalents of USD 242.64 million, with total debt (including Revolving credit facility borrowings) of USD 7.08 billion.

Key Risks: For FY18, FY19, and FY20, the company's main client, EQT Corporation, contributed 74%, 69%, and 64% of total sales, respectively. The significant concentration of the revenue from a single customer could hamper the company's operational and financial strength in the future.

Outlook: ETRN indicated in its Q2FY21 press release that its net income in Q3FY21 is expected to range between USD 55 – 75 million, with an adjusted EBITDA of USD 245 – 265 million.

For FY21, net income is estimated to be in the range of USD 215 – 285 million, and adjusted EBITDA will range from USD 1070 – 1140 million. ETRN also projects its free cash flow to be between USD 380 and USD 450 million during FY21.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ETRN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ETRN stock price has already surged 29.79% in the past nine months and is currently trading at a higher band of the 52-weeks range of USD 6.23 to USD 10.50. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 66.67. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 9.55. Considering the uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 10.44, up 2.96% as of October 01, 2021, 2:42 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Stride, Inc.

LRN Detail

Stride, Inc. (NYSE: LRN) (formerly, K12 Inc.) is a technology-based education firm that offers individualized learning products and services to learners of all ages. Since its founding, more than three million children have attended schools that have benefited from its services. It has two main lines of business: 1) General Education and 2) Career Learning. The selling of curriculum, administrative support, and technological services to virtual and blended public schools accounts for a substantial portion of LRN's income.

FY21 Results: Revenues increased by 47.66 % to USD 1.54 billion in FY21 (ending June 30, 2021), compared to USD 1.04 billion in FY20, owing to increased demand across LRN's entire product line. Consequently, it earned USD 71.45 million in net income in FY21, up 191.57% from USD 24.51 million in FY20. LRN ended the quarter with a cash position of USD 386.08 million and total debt of USD 368.18 million.

Key Risks: LRN depends on per-pupil funding amounts established via a legislative process at all levels of government to generate a substantial portion of its revenue through Managed Public-School Programs. As a result, the company might suffer if these budget appropriations significantly decrease due to economic conditions, political resistance, or new limitations. Furthermore, to deliver products and services to its consumers, it relies on various information technology systems. Therefore, any IT system failure, whether caused by criminal activity or a technological error, might harm the company's reputation and diminish demand for its services.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LRN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LRN's stock price surged 71.90% in the past nine months and is currently trading close to the higher end of the 52-week range of USD 20.39 to USD 37.21. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 60.94. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 33.36. Considering the uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 36.50, up 1.54% as of October 01, 2021, 11:20 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.