DT Midstream, Inc. (DTM) Bundle
Understanding DT Midstream, Inc. (DTM) Revenue Streams
Understanding DT Midstream, Inc.’s Revenue Streams
The revenue of DT Midstream, Inc. is derived from two primary segments: Pipeline and Gathering. Below is a detailed breakdown of these revenue sources as of 2024.
Breakdown of Primary Revenue Sources
| Segment | Operating Revenues (Q3 2024) | Operating Revenues (Q3 2023) | Operating Revenues (YTD 2024) | Operating Revenues (YTD 2023) |
|---|---|---|---|---|
| Pipeline | $112 million | $96 million | $328 million | $271 million |
| Gathering | $136 million | $138 million | $404 million | $407 million |
| Total | $248 million | $234 million | $732 million | $678 million |
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, the year-over-year revenue growth rate was:
- Total Revenue Growth: 6% increase from Q3 2023 ($234 million) to Q3 2024 ($248 million).
- Pipeline Revenue Growth: 16.67% increase from Q3 2023 ($96 million) to Q3 2024 ($112 million).
- Gathering Revenue Decline: 1.45% decrease from Q3 2023 ($138 million) to Q3 2024 ($136 million).
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contribution of different business segments to total revenue is as follows:
- Pipeline Segment: 45% of total revenue.
- Gathering Segment: 55% of total revenue.
Analysis of Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, significant changes in revenue streams include:
- Pipeline segment revenues increased by $57 million primarily due to new contracts and expansion of the Haynesville System.
- Gathering segment revenues decreased by $3 million, primarily attributed to lower volumes at Appalachia Gathering.
The overall revenue increased by $54 million for the nine months ended September 30, 2024, compared to the same period in 2023.
Summary of Revenue Performance
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Total Operating Revenues | $248 million | $234 million | $732 million | $678 million |
| Pipeline Revenues | $112 million | $96 million | $328 million | $271 million |
| Gathering Revenues | $136 million | $138 million | $404 million | $407 million |
A Deep Dive into DT Midstream, Inc. (DTM) Profitability
A Deep Dive into Profitability Metrics
Understanding the profitability metrics of DT Midstream, Inc. is crucial for evaluating its financial health. The following sections outline key profitability measures, trends, and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
The company’s profitability can be assessed through its gross profit, operating profit, and net profit margins. Below is a detailed breakdown of the latest figures:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Operating Revenues (in millions) | $248 | $234 | $732 | $678 |
| Net Income Attributable (in millions) | $88 | $91 | $281 | $263 |
| Gross Profit Margin (%) | 35.48% | 38.79% | 38.39% | 38.77% |
| Operating Profit Margin (%) | 29.03% | 28.85% | 28.63% | 25.74% |
| Net Profit Margin (%) | 35.48% | 38.79% | 38.39% | 38.77% |
Trends in Profitability Over Time
Examining the profitability trends over the past year reveals fluctuations in net income and operating revenues:
- Q3 2024 net income decreased by 3.3% compared to Q3 2023.
- Year-to-date net income increased by 6.8% compared to the previous year.
- Operating revenues for Q3 2024 increased by 6.0% compared to Q3 2023.
Comparison of Profitability Ratios with Industry Averages
When comparing the company’s profitability ratios with industry averages:
| Profitability Ratio | DT Midstream (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 35.48% | 37.00% |
| Operating Profit Margin | 29.03% | 28.00% |
| Net Profit Margin | 35.48% | 30.00% |
Analysis of Operational Efficiency
Operational efficiency is reflected in the company’s cost management and gross margin trends:
- Operating expenses increased by 10% year-over-year, attributed to higher production-related costs.
- Despite increased expenses, the operating profit margin remained stable, indicating effective cost management strategies.
- The gross margin trend shows a slight decline, from 38.79% in Q3 2023 to 35.48% in Q3 2024.
Debt vs. Equity: How DT Midstream, Inc. (DTM) Finances Its Growth
Debt vs. Equity Structure
DT Midstream, Inc. has a structured approach to its financing, balancing between debt and equity to support its operations and growth. As of September 30, 2024, the company's long-term debt stood at $2.7 billion, with a breakdown as follows:
| Debt Type | Interest Rate | Maturity Date | Amount (in millions) |
|---|---|---|---|
| 2029 Notes | 4.125% | 2029 | $1,100 |
| 2031 Notes | 4.375% | 2031 | $1,000 |
| 2032 Notes | 4.300% | 2032 | $600 |
| Term Loan Facility | Variable | 2028 | $0 |
In September 2024, the company repaid its Term Loan Facility of $399 million, resulting in a loss on extinguishment of debt amounting to $4 million due to unamortized discount and issuance costs .
The total long-term debt net of unamortized discounts and issuance costs was $2,674 million as of September 30, 2024, compared to $3,065 million at the end of 2023 . The company also maintains a Revolving Credit Facility with a total availability of $1 billion, of which $16 million was committed to letters of credit, leaving a net availability of $984 million as of the same date .
The debt-to-equity ratio is a critical metric for assessing the balance between debt and equity financing. For DT Midstream, the total stockholders' equity was reported at $4.356 billion as of September 30, 2024 . This results in a debt-to-equity ratio calculated as follows:
| Metric | Value |
|---|---|
| Total Long-Term Debt | $2,674 million |
| Total Equity | $4,356 million |
| Debt-to-Equity Ratio | 0.61 |
This ratio indicates a conservative leverage position compared to industry standards, which typically range from 0.75 to 1.5 for companies in the midstream sector .
Recent financing activities included the repayment of long-term debt and a focus on managing interest expenses, which amounted to $37 million for the nine months ended September 30, 2024, down from $42 million in the same period of the previous year. This reduction was largely due to lower outstanding borrowings under the Revolving Credit Facility .
DT Midstream's approach to financing emphasizes a balance between debt and equity to ensure financial flexibility. The company has consistently utilized its equity base to support growth while strategically managing debt levels to optimize capital costs and maintain a healthy balance sheet.
Assessing DT Midstream, Inc. (DTM) Liquidity
Assessing DT Midstream, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 0.95. This is calculated by dividing current assets of $249 million by current liabilities of $262 million.
Quick Ratio: The quick ratio stands at 0.79, calculated using quick assets (current assets less inventory) of approximately $249 million (assuming no inventory) against current liabilities of $262 million.
Analysis of Working Capital Trends
The working capital decreased from $38 million in December 2023 to ($13 million) in September 2024, indicating potential liquidity concerns. This trend reflects a 34% decline in working capital over the nine-month period.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ending September 30, 2024, net cash provided by operating activities was $611 million, compared to $614 million in the same period of 2023.
Investing Cash Flow: Cash used in investing activities was $203 million for the nine months ending September 30, 2024, compared to ($223 million) in the previous year, showing an improvement in cash flow from investing.
Financing Cash Flow: Cash used in financing activities was ($793 million), significantly higher than ($422 million) in the prior year, reflecting increased repayments of long-term debt.
| Cash Flow Type | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Operating Activities | $611 million | $614 million |
| Investing Activities | ($203 million) | ($223 million) |
| Financing Activities | ($793 million) | ($422 million) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $77 million in cash and cash equivalents. With $16 million in letters of credit outstanding and no borrowings under the Revolving Credit Facility, the total available liquidity was approximately $1.1 billion.
Furthermore, the company has a significant long-term debt of $2,674 million as of September 30, 2024, which may impact its future liquidity if not managed properly.
Is DT Midstream, Inc. (DTM) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share (EPS) for the nine months ended September 30, 2024, was $2.87. As of September 30, 2024, the stock price was approximately $35.00. This results in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $35.00 / $2.87 = 12.19
Price-to-Book (P/B) Ratio
As of September 30, 2024, the book value per share can be calculated using the total equity of $4,218 million and shares outstanding of 97.156 million:
Book Value Per Share = Total Equity / Shares Outstanding = $4,218 million / 97.156 million = $43.43
The P/B ratio is:
P/B Ratio = Stock Price / Book Value Per Share = $35.00 / $43.43 = 0.81
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated as follows:
- Market Capitalization: $35.00 97.156 million = $3,403 million
- Long-term Debt: $2,674 million
- Cash and Cash Equivalents: $77 million
- Enterprise Value = Market Capitalization + Long-term Debt - Cash = $3,403 million + $2,674 million - $77 million = $6,000 million
For the nine months ended September 30, 2024, EBITDA was $376 million. Thus, the EV/EBITDA ratio is:
EV/EBITDA = Enterprise Value / EBITDA = $6,000 million / $376 million = 15.96
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $30.00 and a high of $40.00. The current price of $35.00 reflects a moderate position within this range.
Dividend Yield and Payout Ratios
As of October 29, 2024, the quarterly dividend declared is $0.735. With a stock price of $35.00, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = ($0.735 4) / $35.00 = 8.4%
The payout ratio can be calculated as follows:
Payout Ratio = Dividends / Net Income = ($0.735 4) / $2.87 = 1.03
Analyst Consensus on Stock Valuation
Current analyst consensus ratings indicate a mix of buy and hold positions. The average target price among analysts is approximately $37.00, suggesting potential upside from the current price of $35.00.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 12.19 |
| P/B Ratio | 0.81 |
| EV/EBITDA | 15.96 |
| Current Stock Price | $35.00 |
| 12-month Price Range | $30.00 - $40.00 |
| Dividend Yield | 8.4% |
| Payout Ratio | 1.03 |
| Analyst Consensus | Buy/Hold |
| Average Target Price | $37.00 |
Key Risks Facing DT Midstream, Inc. (DTM)
Key Risks Facing DT Midstream, Inc.
DT Midstream, Inc. operates in a highly competitive environment, which poses several internal and external risks that can impact its financial health.
Industry Competition
The natural gas midstream sector is characterized by significant competition. As of September 30, 2024, DT Midstream reported operating revenues of $248 million for the third quarter, reflecting a slight increase from $244 million in the previous quarter. The company faces competition from both established players and new entrants, which may pressure pricing and market share.
Regulatory Changes
Regulatory risks are substantial in the energy sector. Compliance with federal, state, and local regulations can incur significant costs. The company is subject to extensive environmental regulations, which can result in unplanned expenditures for pollution control equipment and other compliance costs. As of September 30, 2024, the company had total liabilities of $4.231 billion, which includes provisions for potential regulatory compliance.
Market Conditions
Market fluctuations in natural gas prices directly affect revenue. For the nine months ending September 30, 2024, the company reported total operating revenues of $732 million, an increase from $678 million in the same period of 2023. However, volatility in natural gas prices can impact future revenues and profitability.
Operational Risks
Operational risks include the potential for pipeline disruptions and maintenance issues. The company's operating expenses for the Pipeline segment increased to $48 million for the nine months ended September 30, 2024, compared to $38 million in the same period of 2023. Such increases can affect overall profitability and operational efficiency.
Financial Risks
Financial risks are highlighted by the company's debt levels. As of September 30, 2024, DT Midstream had long-term debt of $2.674 billion. The company repaid $399 million in September 2024 under its Term Loan Facility, which resulted in a loss on extinguishment of debt of $4 million. High leverage can restrict financial flexibility and increase vulnerability to market changes.
Strategic Risks
Strategic risks arise from the company's growth initiatives. In July 2024, DT Midstream acquired a clean fuels gathering project for $12 million, with contingent payments up to $34 million based on future performance. While this acquisition aligns with their strategic goals, it also introduces risks related to execution and integration.
Mitigation Strategies
- To mitigate operational risks, the company focuses on maintaining high safety standards and efficient maintenance practices.
- Financial flexibility is maintained through a Revolving Credit Facility with a total availability of $1 billion.
- The company aims to secure long-term contracts to stabilize revenues and limit exposure to market volatility.
| Risk Type | Description | Impact |
|---|---|---|
| Industry Competition | High competition from established and new players | Pressure on pricing and market share |
| Regulatory Changes | Compliance with environmental regulations | Potential for increased costs and liabilities |
| Market Conditions | Volatility in natural gas prices | Impact on revenue and profitability |
| Operational Risks | Pipeline disruptions and maintenance issues | Increased operational expenses |
| Financial Risks | High leverage and debt levels | Reduced financial flexibility |
| Strategic Risks | Execution of growth initiatives | Risks related to acquisition performance |
Through careful management of these risks, the company aims to enhance its financial resilience and operational effectiveness in a challenging market landscape.
Future Growth Prospects for DT Midstream, Inc. (DTM)
Future Growth Prospects for DT Midstream, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through various strategic initiatives including product innovations, market expansions, and acquisitions. One notable acquisition is the Clean Fuels Gathering project, which was completed on July 1, 2024, for a purchase consideration of $12 million. This acquisition aligns with the company's strategy to pursue economically attractive opportunities and deploy GHG reducing technologies.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections are promising, with expected revenue from fixed consideration associated with unsatisfied performance obligations totaling $704 million over the next several years. The breakdown of this revenue is as follows:
| Year | Revenue (millions) |
|---|---|
| Remainder of 2024 | 35 |
| 2025 | 150 |
| 2026 | 128 |
| 2027 | 97 |
| 2028 | 65 |
| 2029 and thereafter | 229 |
| Total | 704 |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company continues to pursue economically attractive expansion opportunities that leverage its current asset footprint. Key initiatives include further expansion at the Haynesville System (LEAP) and new contracts at the Washington 10 Storage Complex. Recent operational improvements have resulted in an increase in operating revenues, up to $248 million for the three months ended September 30, 2024, compared to $234 million in the same period in 2023.
Competitive Advantages That Position the Company for Growth
DT Midstream's long-term agreements with customers and the strategic connectivity of its pipeline assets provide a strong foundation for future growth. The company reported a net income attributable to DT Midstream of $88 million for the three months ended September 30, 2024, slightly down from $91 million in the same period in 2023. This demonstrates resilience in its earnings despite market fluctuations.
Financial Performance Overview
The financial performance reflects growth potential, with operating income from the Pipeline segment reaching $72 million for the three months ended September 30, 2024. Additionally, the Gathering segment's operating revenues were $136 million, indicating stability in this area.
Overall, the combination of strategic acquisitions, market expansions, and a solid financial foundation positions the company favorably for future growth in the midstream sector.
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Article updated on 8 Nov 2024
Resources:
- DT Midstream, Inc. (DTM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of DT Midstream, Inc. (DTM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View DT Midstream, Inc. (DTM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.