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EQT

UPDATE: Analyst Actions: EQT Midstream Partners Rating Cut, But Target Lifted at Credit Suisse; Shares Recoup Most of Earlier Losses

DOWNGRADING to NEUTRAL (from Outperform) After Nearly 25% YTD Run; Revising Ests & TP to $41 (from $39).

Downgrading on Valuation: "We are downgrading EQM to Neutral (from Outperform) on valuation as EQM has rallied nearly 25% thus far in 2013 and appears fairly valued, in our opinion."

Raising TP to $41 (from $39): "Our revised $41 TP (from $39) is based on a 3.75%-4.0% target yield range on our annualized 4Q13 distribution estimate of $1.60/unit, giving us a TP range of $40-$42 and $41 TP. Adding an expected $1.525 in distributions over the NTM implies total return potential of 7%-14% which is not enough for us to stay at Outperform thus our downgrade to Neutral.

Longer term story remains intact: EQM is well positioned to drive 10%+ annual distribution growth over the next five years from drop downs from a large and growing portfolio of mid-stream assets from its parent EQT Corp. ( EQT ). Our estimates include annual $250mm dropdowns through 2015 and $300mm of dropdowns in 2016. We are revising our FY14 EPU estimates to $2.04 (from $2.03)."

Risks to Our Call: "Upside risks include investors bidding the yield still lower as cash continues to flow into the market in search of attractive low moderate risk alternatives that offer attractive and growing dividends and/or distributions. Downside risks include falling NGL prices that could slow Marcellus production which could slow the development of midstream assets at parent, EQT Corp. and thereby slow the distribution growth story at EQM."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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