USAC Stock Bullish on Industry Tailwinds
There’s more to the energy sector than oil. Natural gas deserves your attention, too. Most investors tend not to pay much attention to natural gas, aside from BBQ season, of course. But, it’s the largest source of electricity in the U.S. and a major source of heating around the world.
Natural gas futures are around $3.40 per million British thermal units (BTU). While down significantly from $9.20 per BTU in 2022, prices are still up 6.5% over the last three months, 18.5% over the last six months, and 69% over the last 12 months.
And the outlook remains solid for natural gas. Over the short term, natural gas prices will remain volatile, impacted by seasonal demand and geopolitical events. However, over the longer term, natural gas—and liquefied natural gas (LNG) in particular—gross exports in the U.S. are expected to increase by 19% to 14.2 billion cubic feet per day (Bcf/d) in 2025 and by 15% to 16.4 Bcf/d in 2026. (Source: “Short-Term Energy Outlook,” U.S. Energy Information Administration, April 8, 2025.)
There are many different kinds of natural gas plays investors can consider. One pick-and-shovel energy stock with services that are always in demand is USA Compression Partners LP (NYSE:USAC), an oil and gas equipment and services company.
The Dallas-Texas-based company is one of the country’s largest independent providers of natural gas compression services. It has a major operating presence in each of the gas growth basins in the U.S., including Marcellus/Utica, DJ Basin, Gulf Coast, Permian, and Barnett/Haynesville. (Source: “Investor Presentation, J.P. Morgan Global Leveraged Finance Conference,” USA Compression Partners LP, last accessed April 30, 2025.)
USA Compression provides its services under fixed-term contracts to oil and gas companies, including independent producers, processors, gatherers, and transporters of natural gas and crude oil.
The best part is, regardless of where oil and gas prices are, natural gas companies always need their infrastructure serviced.
Due to distance and friction, natural gas loses pressure as it moves through pipelines. Compression ensures that gas continues to move smoothly through pipelines. Compressors are also used at above-ground and underground natural gas storage facilities.
This essential service has helped USA Compression generate stable cash flows during all commodity cycles.
Record 2024 Results
For the fourth quarter ended December 31, USA Compression Partners reported record revenue of $245.9 million, up 9.2% from $225.0 million in the fourth quarter of 2023. (Source: “USA Compression Partners Reports Fourth-Quarter 2024 Results and Provides 2025 Outlook; Achieves Record Results,” USA Compression Partners LP, February 11, 2025.)
The company’s fourth-quarter net income increased roughly 10% on an annual basis to $25.4 million. Its record net cash provided by operating activities was $130.2 million, compared to $91.6 million for fourth-quarter 2023.
USA Compression’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $155.5 million, versus $138.6 million in the fourth quarter of 2023.
Full-year revenue grew 12.3% to $950.4 million, while net income advanced 46% to $99.5 million. The company’s net cash provided by operating activities increased 25.5% to $341.3 million.
Commenting on the results, Clint Green, USA Compression’s president and chief executive officer, said, “Our fourth-quarter financial results included another consecutive quarter of record-setting revenues and Adjusted EBITDA, as well as record-setting Distributable Cash Flow and Distributable Cash Flow Coverage.”
“These financial results were driven by improved operational efficiencies as we again achieved record average revenue per-horsepower of $20.85 and record revenue-generating horsepower of 3.56 million, which continues to reflect the tight contract compression service space.”
Quarterly Dividend of $0.525/Share Maintained
USA Compression Partners stock is a great opportunity for income investors. That’s because it’s a limited partnership (LP); to maintain this status, the company must generate 90% of its income through activities or interest and dividend payments related to natural resources. This results in some of the biggest, most reliable dividends on Wall Street.
Since USA Compression Partners stock’s initial public offering in 2023, the company has never missed or lowered its dividend payout. It has also returned in excess of $1.6 billion in cash to unitholders. (Source: “Distributions & Splits,” USA Compression Partners LP, last accessed April 30, 2025.)
In the fourth quarter, the company announced that its distributable cash flow climbed 20.5% to $96.3 million with coverage of 1.56 times, compared to 1.48 times in the fourth quarter of 2023. In 2024, it announced that distributable cash flow grew 26% to $355.3 million.
USA Compression Partners stock currently pays a dividend of $0.525 per unit, or $2.10 on an annual basis, for a yield of 8.4%.
USA Compression Partners Stock Closing in on Record High
USAC stock has been on a solid run since the 2020 health crisis. Over the last five years, the stock has rallied an impressive 473%. On February 10, 2025, USA Compression Partners stock hit a new record high of $30.10 per share. The stock has given up some ground since then, but it continues to trade near that level.
Wall Street expects USA Compression Partners stock to essentially hit that level again over the coming quarters, with analysts providing a 12-month share price target range of $26.67 to $30.00 per share.
Chart courtesy of StockCharts.com
The Lowdown on USA Compression Partners Stock
USA Compression Partners LP is a great energy stock that provides essential natural gas compression services in each of the gas growth basins here in the U.S. This helps provide the company with secure, stable cash flows, which result in durable returns on invested capital.
After reporting an “outstanding” record 2023, USA Compression ended 2024 on a similar trajectory, with record revenues, adjusted EBITDA, distributable cash flow, and distributable cash flow coverage.
Thanks to strong demand for natural gas, the company should, for now, report record financial results. This should help juice USA Compression Partners stock and result in increased dividends.
And, with insider ownership of 40.1%, management should be motivated to generate strong returns. This is also good news for the 115 institutions that hold an equally impressive 40.3% of all outstanding USA Compression Partners stock. Some of the biggest holders include Morgan Stanley, Goldman Sachs Group, UBS Group AG, and Raymond James Financial. (Source: “USA Compression Partners, LP (USAC),” Yahoo! Finance, last accessed April 30, 2025.)