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Relative valuation derived from Energy sector median benchmarks. Model weights: EV/EBITDA (40%), P/B (35%), P/S (25%). Multiples adjusted for extreme outliers and non-recurring volatility.
Auditing capital efficiency...
Quality Profile Audit
Score: 50GRADE C+
Composite assessment of profitability, capital efficiency, and financial strength. Top-tier entities demonstrate sustainable cash flow generation.
Return on Equity
Profit generated per dollar of shareholder equity
155.6%
Sector: 6.7%
Dividend Analysis audit
HIGH YIELD
8.39%
Trailing Yield
$8.39
Per $100 Invested
Attractive yield supported by strong profitability.
Est. Payout Ratio
63%MID
Analyst Projections
Analyst Consensus
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Based on our 6-factor quantitative model, Hess Midstream LP (HESM) receives a "Hold" rating with a composite score of 49.2/100, ranked #246 out of 4446 stocks. Key factor scores: Quality 50/100, Value 75/100, Momentum 45/100. This is quantitative analysis only — not investment advice.
Hess Midstream LP (HESM) Stock Analysis — April 2026 Rating, Price, and Forecast
Company Overview — What Does Hess Midstream LP Do?
Hess Midstream LP owns, develops, operates, and acquires midstream assets. The company operates through three segments: Gathering; Processing and Storage; and Terminaling and Export. The Gathering segment owns natural gas gathering and compression; crude oil gathering systems; and produced water gathering and disposal facilities. Its gathering systems consists of approximately 1,350 miles of high and low pressure natural gas and natural gas liquids gathering pipelines with capacity of approximately 450 million cubic feet per day; and crude oil gathering system comprises approximately 550 miles of crude oil gathering pipelines. The Processing and Storage segment comprises Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota; a 50% interest in the Little Missouri 4 gas processing plant located in south of the Missouri River in McKenzie County, North Dakota; and Mentor Storage Terminal, a propane storage cavern and rail, and truck loading and unloading facility located in Mentor, Minnesota. The Terminaling and Export segment owns Ramberg terminal facility; Tioga rail terminal; and crude oil rail cars, as well as Johnson's Corner Header System, a crude oil pipeline header system. Hess Midstream LP was founded in 2014 and is based in Houston, Texas. Hess Midstream LP (HESM) is classified as a mid-cap stock in the Energy sector, specifically within the Petroleum And Natural Gas industry. The company is led by CEO John B. Hess and employs approximately 200 people. With a market capitalization of $4.9B, HESM is one of the notable companies in the Energy sector.
Hess Midstream LP (HESM) Stock Rating — Hold (April 2026)
As of April 2026, Hess Midstream LP receives a Hold rating with a composite score of 49.2/100 and 3 out of 5 stars from the Blank Capital Research quantitative model.HESM ranks #246 out of 4,446 stocks in our coverage universe. Within the Energy sector, Hess Midstream LP ranks #38 of 128 stocks, placing it in the upper half of its Energy peers. The rating is generated by a multi-factor model that weighs quality (30%), momentum (25%), value (15%), investment (10%), stability (10%), and short interest (10%).
HESM Stock Price and 52-Week Range
Hess Midstream LP (HESM) currently trades at $39.57. The stock gained $0.25 (0.6%) in the most recent trading session. The 52-week high for HESM is $44.14, which means the stock is currently trading -10.4% from its annual peak. The 52-week low is $31.63, putting the stock 25.1% above its annual trough. Recent trading volume was 923K shares, suggesting relatively thin trading activity.
Is HESM Overvalued or Undervalued? — Valuation Analysis
Hess Midstream LP (HESM) carries a value factor score of 75/100 in the Blank Capital model, suggesting the stock trades at a meaningful discount to its fundamental earning power. The trailing price-to-earnings ratio is 7.47x, compared to the Energy sector average of 19.63x — a discount of 62%. The price-to-book ratio stands at 11.63x, versus the sector average of 1.64x. The price-to-sales ratio is 3.19x, compared to 0.47x for the average Energy stock. On an enterprise value basis, HESM trades at 8.97x EV/EBITDA, versus 3.50x for the sector.
Based on these multiples, Hess Midstream LP appears attractively valued relative to both its sector peers and the broader market. Value-oriented investors may find the current entry point compelling, particularly if the company's fundamental quality metrics also score well.
Hess Midstream LP Profitability — ROE, Margins, and Quality Score
Hess Midstream LP (HESM) earns a quality factor score of 50/100, indicating solid business quality with consistent operational execution. The return on equity (ROE) is 155.6%, compared to the Energy sector average of 6.7%, which demonstrates strong shareholder value creation. Return on assets (ROA) comes in at 15.5% versus the sector average of 3.7%.
On a margin basis, Hess Midstream LP reports gross margins of 100.0%, compared to 52.7% for the sector. The operating margin is 61.9% (sector: 10.7%). Net profit margin stands at 42.7%, versus 6.4% for the average Energy stock. Revenue growth is running at 15.2% on a trailing basis, compared to -1.2% for the sector. The overall profitability profile is adequate, though there may be room for margin expansion.
HESM Debt, Balance Sheet, and Financial Health
Hess Midstream LP has a debt-to-equity ratio of 861.0%, compared to the Energy sector average of 55.0%. This elevated leverage warrants close monitoring, as it increases the company's sensitivity to rising interest rates and economic downturns. The current ratio is 0.85x, which may signal near-term liquidity tightness. Total debt on the balance sheet is $3.77B. Cash and equivalents stand at $6M.
HESM has a beta of 0.59, meaning it is less volatile than the S&P 500, making it a relatively defensive holding. The stability factor score for Hess Midstream LP is 83/100, indicating low-volatility characteristics and consistent price behavior that appeals to risk-averse investors.
Hess Midstream LP Revenue and Earnings History — Quarterly Trend
In TTM 2026, Hess Midstream LP reported revenue of $1.60B. Net income for the quarter was $681M. Gross margin was 100.0%. Operating income came in at $988M.
In FY 2025, Hess Midstream LP reported revenue of $1.62B. Net income for the quarter was $685M. Revenue grew 8.4% year-over-year compared to FY 2024. Operating income came in at $1.01B.
In Q3 2025, Hess Midstream LP reported revenue of $421M. Net income for the quarter was $176M. Revenue grew 11.2% year-over-year compared to Q3 2024. Operating income came in at $259M.
In Q2 2025, Hess Midstream LP reported revenue of $414M. Net income for the quarter was $180M. Revenue grew 13.3% year-over-year compared to Q2 2024. Operating income came in at $260M.
Over the past 8 quarters, Hess Midstream LP has demonstrated a growth trajectory, with revenue expanding from $366M to $1.60B. Investors analyzing HESM stock should weigh these quarterly trends alongside the valuation and quality metrics discussed above.
HESM Dividend Yield and Income Analysis
Hess Midstream LP (HESM) currently pays a dividend yield of 8.4%. At this yield, a $10,000 investment in HESM stock would generate approximately $$839.00 in annual dividend income. This compares to the Energy sector average dividend yield of 1.9%, meaning HESM offers above-average income for its sector. With a net margin of 42.7%, the dividend appears well-covered by earnings, suggesting sustainable payouts going forward.
HESM Momentum and Technical Analysis Profile
Hess Midstream LP (HESM) has a momentum factor score of 45/100, reflecting neutral trend characteristics. The stock is neither significantly outperforming nor underperforming the broader market on a momentum basis. The investment factor score is 27/100, which measures capital allocation efficiency and asset growth patterns. The short interest score of 8/100 signals elevated short interest, which can indicate bearish sentiment among institutional investors.
HESM vs Competitors — Energy Sector Ranking and Peer Comparison
Comparing HESM against the S&P 500 benchmark is also instructive for understanding relative performance. Investors can view the full HESM vs S&P 500 (SPY) comparison to assess how Hess Midstream LP stacks up against the broader market across all factor dimensions.
HESM Next Earnings Date
No upcoming earnings date has been announced for Hess Midstream LP (HESM) at this time. Check the earnings calendar for the latest scheduling updates across all stocks in our coverage universe.
Should You Buy HESM? — Investment Thesis Summary
Hess Midstream LP presents a balanced picture with arguments on both sides. The value score of 75/100 suggests attractive pricing relative to fundamentals. Low volatility (stability score 83/100) reduces downside risk.
In summary, Hess Midstream LP (HESM) earns a Hold rating with a composite score of 49.2/100 as of April 2026. The rating is derived from the Blank Capital Research methodology, which combines six factor dimensions into a single quantitative ranking. Investors should consider these quantitative signals alongside their own fundamental research, risk tolerance, and investment time horizon before making buy or sell decisions on HESM stock.
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Institutional Research Dossier
Hess Midstream LP (HESM) Deep Dive Analysis
Published on March 24, 2026
Action RatingHold
Sections
Executive Summary
We maintain a Hold rating on Hess Midstream LP (HESM). While the company exhibits strong profitability and trades at attractive valuation multiples relative to its sector, its negative free cash flow and high debt levels raise concerns about its long-term financial sustainability and capital allocation strategy. The current valuation appears to reflect these risks, justifying a neutral stance as we await further evidence of improved cash flow generation and debt reduction.
HESM operates in a critical segment of the energy value chain, providing essential midstream services to Hess Corporation and other producers in the Bakken region. Its strategic assets and long-term contracts provide a degree of stability, but the company's reliance on a single geographic area and its parent company introduces concentration risk. Investors should closely monitor HESM's ability to generate positive free cash flow and manage its debt burden to assess its long-term investment potential.
Business Strategy & Overview
Hess Midstream LP operates as a midstream service provider, primarily focused on gathering, processing, storage, and terminaling of crude oil, natural gas, and produced water in the Bakken and Three Forks formations in North Dakota. The company's revenue is largely derived from long-term, fee-based contracts with Hess Corporation, its primary customer, providing a relatively stable revenue stream. HESM's strategy revolves around supporting Hess's production activities in the region, expanding its infrastructure to accommodate increasing volumes, and optimizing its existing assets to improve efficiency and profitability.
The company's three operating segments – Gathering, Processing and Storage, and Terminaling and Export – are interconnected and contribute to a comprehensive midstream solution for its customers. The Gathering segment, with its extensive pipeline network, collects crude oil, natural gas, and produced water from wellheads and transports them to processing and storage facilities. The Processing and Storage segment processes natural gas to remove impurities and extract natural gas liquids (NGLs), while also providing storage capacity for propane. The Terminaling and Export segment facilitates the transportation of crude oil and NGLs to market via rail and pipeline.
HESM's strategic positioning is heavily influenced by its relationship with Hess Corporation. As a master limited partnership (MLP) initially sponsored by Hess, HESM benefits from a strong alignment of interests and a guaranteed source of throughput. However, this relationship also creates a concentration risk, as a significant portion of HESM's revenue is dependent on Hess's production levels and capital spending plans in the Bakken region. The company's ability to diversify its customer base and expand its services beyond Hess will be crucial for its long-term growth and stability.
The company's growth strategy includes organic expansion projects, such as building new pipelines and expanding processing capacity, as well as potential acquisitions of complementary midstream assets. HESM's management team has a track record of successfully executing these projects and integrating acquired assets, but the company's high debt levels may limit its ability to pursue large-scale acquisitions in the near term. The company must carefully balance its growth ambitions with its financial constraints to ensure sustainable value creation for its unitholders.
Execution Benchmarks audit
Revenue Growth
YOY expansion rate
15.2%
Sector: -1.2%
-1396% VS SCTR
Economic Moat Analysis
Hess Midstream LP possesses a Narrow economic moat, primarily derived from its strategic asset base and long-term contracts in the Bakken region. The company's extensive network of pipelines, processing plants, and storage facilities creates a barrier to entry for potential competitors, as replicating this infrastructure would require significant capital investment and time. Furthermore, HESM's long-term, fee-based contracts with Hess Corporation provide a degree of revenue stability and reduce the risk of competition from alternative midstream providers.
The company's moat is further strengthened by its integrated midstream services, which offer a comprehensive solution for its customers. By providing gathering, processing, storage, and terminaling services, HESM can capture a larger share of the midstream value chain and create stronger relationships with its customers. This integrated approach also allows HESM to optimize its operations and improve efficiency, giving it a cost advantage over smaller, less diversified competitors.
However, HESM's moat is not without its limitations. The company's reliance on a single geographic region and its dependence on Hess Corporation for a significant portion of its revenue create concentration risk. If Hess were to reduce its production in the Bakken region or switch to a different midstream provider, HESM's revenue and profitability could be negatively impacted. Furthermore, the company faces competition from other midstream providers in the region, which could put pressure on its pricing and margins.
The long-term sustainability of HESM's moat will depend on its ability to diversify its customer base, expand its services beyond Hess, and maintain its cost competitiveness. The company must also continue to invest in its infrastructure to accommodate increasing volumes and adapt to changing market conditions. While the company's existing assets and contracts provide a solid foundation, its moat is not impenetrable and requires ongoing investment and strategic management to maintain its competitive advantage.
Financial Health & Profitability
Hess Midstream LP exhibits a mixed financial profile. The company demonstrates strong profitability, with a net margin of 42.7% and an operating margin of 61.9%, significantly exceeding the sector averages of 6.3% and 10.6%, respectively. The company's return on equity (ROE) is exceptionally high at 155.6%, indicating efficient utilization of equity capital. Revenue growth has also been robust, with a 15.2% increase compared to a sector average of -1.7%. The gross margin is 100%, which is unusual and warrants further investigation to understand the accounting practices contributing to this figure.
However, the company's free cash flow (FCF) is negative at -$79.10 million, raising concerns about its ability to fund its capital expenditures and distributions. This is a significant red flag, especially for an MLP that relies on distributions to attract investors. The company's total debt is substantial at $3.77 billion, resulting in a high debt-to-equity ratio of 861.00, far exceeding the sector average of 55.00. This high leverage increases the company's financial risk and limits its flexibility to pursue growth opportunities or weather economic downturns.
Analyzing the quarterly financial history reveals consistent revenue and net income growth over the past few years. Revenue has increased steadily from $1.35 billion in FY2023 to $1.62 billion in FY2025. Net income has also followed a similar trend, increasing from $607.70 million to $684.60 million. Operating margins have remained consistently high, hovering around 61-62% throughout the period. However, the absence of FCF data in the quarterly reports makes it difficult to assess the company's cash flow generation on a more granular basis.
The company's current ratio of 0.85 indicates a potential liquidity risk, as its current liabilities exceed its current assets. This could make it challenging for the company to meet its short-term obligations. The company's low cash balance of $5.50 million further exacerbates this concern. Overall, HESM's financial health is characterized by strong profitability and revenue growth, but is offset by negative free cash flow, high debt levels, and a weak liquidity position. The company needs to improve its cash flow generation and reduce its debt burden to ensure its long-term financial sustainability.
Valuation Assessment
Hess Midstream LP's valuation presents a mixed picture. The company's P/E ratio of 7.5x is significantly lower than the sector average of 19.5x, suggesting that the stock may be undervalued relative to its earnings. Similarly, its EV/EBITDA ratio of 2.2x is also lower than the sector average of 3.5x, further supporting the notion that the company is trading at a discount. These low multiples could be attributed to the market's concerns about the company's negative free cash flow and high debt levels.
However, the company's high ROE of 155.6% could justify a higher valuation. This indicates that the company is generating significant returns on its equity, which should be reflected in its stock price. The company's strong revenue growth of 15.2% also supports a higher valuation, as it suggests that the company has the potential to increase its earnings in the future. The market cap of $5.12B seems reasonable given the revenue of $1.62B and EBITDA of $1.01B.
Given the conflicting signals from the valuation metrics, it is difficult to definitively conclude whether the stock is cheap, fair, or expensive. The low P/E and EV/EBITDA ratios suggest that the stock is undervalued, while the high ROE and revenue growth support a higher valuation. The negative free cash flow and high debt levels, however, warrant caution and may explain the market's reluctance to assign a higher multiple to the company's earnings.
A discounted cash flow (DCF) analysis would be helpful in determining the intrinsic value of the stock, but the lack of historical FCF data makes this challenging. Without a reliable estimate of future cash flows, it is difficult to assess whether the stock is trading at a discount to its fair value. Based on the available information, the current valuation appears to be fair, reflecting both the company's strengths and weaknesses. The market seems to be appropriately discounting the stock for its negative free cash flow and high debt levels, while also recognizing its strong profitability and growth potential.
Risk & Uncertainty
Hess Midstream LP faces several key risks that could negatively impact its financial performance and stock price. A primary risk is its concentration of revenue with Hess Corporation. A significant reduction in Hess's production in the Bakken region, or a shift to another midstream provider, would severely impact HESM's revenue and profitability. This dependence creates a vulnerability that is difficult to mitigate in the short term.
Another significant risk is the company's high debt levels. The substantial debt burden increases the company's financial risk and limits its flexibility to pursue growth opportunities or weather economic downturns. Rising interest rates could further exacerbate this risk by increasing the company's borrowing costs and reducing its profitability. The negative free cash flow further compounds this issue, as it necessitates reliance on external financing to fund capital expenditures and distributions.
Regulatory risks also pose a threat to HESM's business. Changes in environmental regulations, particularly those related to pipeline safety and emissions, could increase the company's operating costs and capital expenditures. Furthermore, regulatory scrutiny of hydraulic fracturing (fracking) could indirectly impact HESM by reducing oil and gas production in the Bakken region. Competition from other midstream providers in the Bakken region could also put pressure on HESM's pricing and margins. New pipeline projects or expansions by competitors could erode HESM's market share and reduce its profitability.
Bulls Say / Bears Say
The Bull Case
BULL VIEWHess Midstream's strategic assets in the Bakken, coupled with long-term contracts, provide a stable and predictable revenue stream, ensuring consistent distributions to unitholders.
BULL VIEWThe company's high operating margins and strong revenue growth demonstrate its operational efficiency and ability to capitalize on increasing production volumes in the region, driving future profitability.
BULL VIEWHESM's low valuation multiples relative to its sector peers present an attractive entry point for investors seeking exposure to the energy midstream space with significant upside potential.
The Bear Case
BEAR VIEWHess Midstream's negative free cash flow and high debt levels raise serious concerns about its long-term financial sustainability and ability to fund future growth without further diluting unitholders.
BEAR VIEWThe company's heavy reliance on Hess Corporation for revenue creates significant concentration risk, making it vulnerable to any downturn in Hess's production or a shift to alternative midstream providers.
BEAR VIEWIncreased regulatory scrutiny and potential changes in environmental regulations could significantly increase HESM's operating costs and capital expenditures, negatively impacting its profitability and cash flow.
About the Author
Marques Blank
Founder & Chief Investment Officer, Blank Capital
Marques brings 15 years of institutional finance and investing experience, having overseen financial planning for a $1.6B defense business unit. He developed the proprietary 6-factor quantitative model used to score HESM and 4,400+ other equities.
Hess Midstream LP exhibits a 321% valuation premium relative to institutional benchmarks. This represents a potential valuation overextension based on current multiples.
Return on Assets
Efficiency of asset utilization
15.5%
Sector: 3.7%
Gross Margin
Pricing power and cost efficiency
100.0%
Sector: 52.7%
Operating Margin
Core business profitability
61.9%
Sector: 10.7%
Net Margin
Bottom-line profitability
42.7%
Sector: 6.4%
Factor Methodology
The Quality factor evaluates the persistence and magnitude of cash flows. Companies with scores >70 exhibit superior competitive moats and financial resilience through economic cycles.
Sector Avg Yield1.89%
Yield Delta+344%
Income Projection audit
A $10,000 investment would generate approximately $839 annually in dividends at the current trailing rate.
