Bernstein has raised the target price for Hess (HES.US) from $166 to $172, and raised it from 'on par with the market' to 'outperforming the market'. They believe that the ongoing arbitration will not 'destroy' Hess' stock if the merger with Chevron (CVX.US) cannot be completed. On Wednesday, Hess rose 2.58%.

Bernstein pointed out that the company's annual growth rates in sales and earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first quarter of 2024 will be about 27% and close to 75%, respectively.

Bernstein downgraded Chevron from 'outperforming the market' to 'on par with the market' and lowered its target price from $183 to $167, expecting the stock to rise by about 6%. However, through the calculation of the merger, considering that Hess shareholders will receive 1.025 shares in Chevron, if the merger is successful, Hess's stock price will rise by 16%. The potential successful merger between the two companies is also an important driving force behind Bernstein's upgrade of Hess's rating this time.

Even if the merger is not completed (which is considered unlikely due to the ongoing arbitration), Hess's independent value is still very strong. Its sales volume growth in the first quarter of 2024 will be 27%, and its earnings before interest, taxes, depreciation, and amortization (EBITDA) will increase by nearly 75%. This means that the potential target price of $188 per share will not be affected.

In addition, Bernstein lowered the WTI crude oil price for 2025 by $5 to $75 per barrel and the Brent crude oil price by $5 to $78 per barrel, which usually means that EBITDA expectations for 2025 are lowered by 7% to 10%.