EQT Corporation has completed its acquisition of Range Resources, solidifying its position as the largest natural gas producer in the United States. The combined entity boasts an enterprise value exceeding $50 billion and is projected to generate approximately $3.5 billion in net income. Analysts highlight EQT's defensible low-cost moat and a substantial inventory expected to last over 30 years, positioning the company favorably amid current macroeconomic and geopolitical trends.
The stock is currently trading at around $55 per share, but analysts argue it has significant upside potential. At the industry-average cost of equity of 7.17%, EQT's fair value is estimated at approximately $84 per share, suggesting a 51% upside from its current price. Even under Berkshire Hathaway's stricter 10% hurdle rate, EQT is considered fairly valued, with a free cash flow yield of about 7% post-takeover premium, which still outperforms tax-adjusted T-bill yields of around 3%.
Key risks include potential regulatory scrutiny due to concerns over monopoly power and uncertainty surrounding European natural gas demand, particularly if Russian gas supply resumes. While Wall Street's consensus rating for EQT is a Strong Buy, quant models adopt a more cautious stance. The article's author, who holds a long position in EQT and Berkshire Hathaway, rates the stock a Buy, emphasizing its robust free cash flow and improving balance sheet.