Bernstein raised its rating on Hess (HES.US) and said a merger failure would not "destroy" the stock price.

Bernstein raised HES's target price from $16.6 to $17.2, from "in-line" to "outperform", believing that the ongoing arbitration process will not "destroy" HES shares. HES shares rose 2.58% on Wednesday.

Bernstein noted that the company's 1Q24 sales and EBITDA growth rates were 27% and nearly 75%, respectively.

Bernstein downgraded Chevron from "outperform" to "in-line" with a price target of $16.7 from $18.3, expecting a 6% upside. However, the calculation of the merger, which would give HES shareholders 1.025 shares of Chevron, implies a 16% upside for HES if the merger were to be successful. The potential successful merger between the two companies was also a key driver of Bernstein's upgrade.

Even if the merger does not happen (which is considered unlikely given the ongoing arbitration), HES's standalone value is strong with 27% sales growth and nearly 75% EBITDA growth in 1Q24, meaning the potential target price of $18.8 per share would not be affected.

Bernstein also cut 2025 WTI price by $5 to $75/barrel and Brent price by $5 to $78/barrel, which typically implies a 7%-10% cut in 2025 EBITDA expectations.