Raymond James Updates Midstream Sector Ratings, Emphasizes Cash Flow Strength for 2026

On January 5, 2026, Raymond James adjusted its ratings across midstream energy stocks, signaling increasing confidence in the sector’s financial durability despite a subdued oil price outlook. The investment firm upgraded Excelerate Energy Inc (NYSE: EE), Sunoco (NYSE: SUN), SunocoCorp, and WaterBridge Infrastructure to Strong Buy, and raised Kinetik Holdings Inc (NYSE: KNTK) to Outperform. Conversely, Enterprise Products Partners LP (NYSE: EPD) was downgraded to Outperform from Strong Buy, while Hess Midstream and MPLX (NYSE: MPLX) were cut to Market Perform. These moves reflect a pivot towards evaluating companies on their execution capabilities and cash flow stability within evolving market dynamics. The firm sees finance markets increasingly rewarding operational discipline over macro demand trends.

Shifting Investor Focus to Execution and Contract Durability

Following a constructive 2025, Raymond James highlighted that investor attention is now turning from broad energy demand towards company-specific delivery and contract acquisition. The firm pointed out that growth in LNG feedgas volumes is expected to continue through 2026 and beyond, while the power sector’s natural gas demand has become a durable secondary growth driver. Despite softer near-term oil prices, most midstream operators maintain strong balance sheets and supportive contract structures. This foundation, Raymond James asserts, allows them to manage a slower liquids environment without compromising base cash flow or financial flexibility.

The brokerage favors companies where bearish views on oil prices, Permian basin fundamentals, or LNG appear overly pessimistic relative to underlying cash-flow strength. This rationale underlies the upgrades of Kinetik and WaterBridge, where more resilient outcomes are forecasted for 2026-2027 compared to current market sentiment. Additionally, the firm identifies Excelerate Energy and Sunoco as positioned to benefit from heightened market volatility. It also reiterated a constructive stance on Energy Transfer as a diversified, lower-risk yield anchor, maintaining its current rating.

Downgrades Reflect Near-Term Growth Limitations, Not Structural Flaws

Raymond James clarified that its downgrades are not a critique of long-term durability. For Enterprise Products Partners, it acknowledged a robust core franchise but noted a thinner catalyst set for 2026-2027. EBITDA growth is expected to be constrained due to headwinds in the base business and intensified competition in natural gas liquids logistics. With current valuations striking a balance between quality assets and cash returns, the brokerage sees limited upside differentiation relative to peers in the near term. Similarly, Hess Midstream and MPLX faced ratings cuts reflecting comparable challenges.

Finance Sector Outlook

Raymond James’ midstream rating revisions underscore an emerging finance market trend toward valuing cash-flow resilience and company-specific execution in 2026. Investors should anticipate performance to hinge less on macroeconomic demand and more on contract tradecraft and operational discipline. This nuanced repositioning highlights the sector’s capacity to weather softer oil prices while capitalizing on LNG volume growth and sustained natural gas demand. As a result, midstream stocks with strong financial flexibility and catalytic growth opportunities are expected to draw greater investor interest in the year ahead.