Cheniere Energy, Inc. (NYSEAMERICAN:LNG) finds itself poised for high growth. Few people outside the energy have heard of LNG stock. They first became known to consumers by operating the stations that provide fuel to natural gas-powered vehicles.
The fact that Tesla Inc (NASDAQ:TSLA) and their battery-powered car now have become a more popular alternative energy source almost may not matter. Cheniere has become its own Tesla in a sense, as it positions itself to take over a newer and much larger market—natural gas exports.
LNG Stock Wins all Around
The company reported Q4 2017 earnings per share (EPS) at 54 cents. This figure came in 8 cents ahead of estimates. It also more than doubles the 4Q 2016 earnings of 25 cents per share. Revenues more than tripled as the company reported $1.75 billion, up from the year-ago level of $571.59 million. Wall Street had been looking for $1.61 billion.
LNG stock only recently has turned a profit. For the year, the company reported a loss of $1.68 per share, compared to a $2.67 loss in 2016. Revenues came in at just over $5.6 billion, $30 million ahead of estimates.
This is also about 3.5 times 2016 revenue figure of $1.28 billion. For 2018, analysts forecast $6.12 billion in revenue and an 85-cent per share annual profit. LNG also raised guidance.
Positioned on the Cutting Edge
Put simply, Cheniere brings liquefied natural gas (sometimes referred to by Cheniere’s stock symbol, “LNG”) to the customer. As mentioned earlier, Cheniere owns stations for natural gas where customers can buy fuel for a natural-gas powered car or bus.
The good news for Cheniere investors is that they now have a much larger customer base. Regarding current reserves, the U.S. stands as the “Saudi Arabia of natural gas.” Until recently, the technology to export natural gas outside of North America did not exist.
Now, thanks to Cheniere, customers in Europe who had depended on Russia for natural gas supplies now have other options. Moreover, American natural gas can now fuel growth in East Asia. In fact, the company recently signed its first LNG deal with China.
Cheniere owns the Sabine Pass LNG receiving terminal in Louisiana. Sabine Pass began operations in 2016 and was the first LNG export facility in the U.S.
The company operates this terminal and an adjacent pipeline through ownership of Cheniere Energy Partners LP (NYSEAMERICAN:CQP) and partial ownership of Cheniere Energy Partners LP Holdings LLC (NYSEAMERICAN:CQH). They are also building another LNG terminal near Corpus Christi, Texas.
Currently, its only competitor in this space is Dominion Energy Inc (NYSE:D). This terminal, located in Maryland, began operations in 2017. Sempra Energy (NYSE:SRE) will also commence operations on a terminal in Hackberry, Louisiana later this year.
Freeport LNG will also begin export operations from Freeport, Texas in 2019. These will be the only five natural gas export terminals in the country for many years to come. Investing in LNG stock buys investors into two of them.
LNG Stock Poised for Profits and Record Highs
Like many companies in its industry, the stock lost much of its value in the oil/gas price slump of 2014-16. However, since the beginning of 2016, LNG stock prices have moved higher. Since reaching a low below $27 per share in January 2016, the stock has recovered to about $58 per share.
Still, the Cheniere stock price remains below its 2014 high of $85 per share. Natural gas exports will likely bring Cheniere stock to new record highs.
However, buying into Cheniere stock will not come cheap. Even at current prices, the forward price-to-earnings (PE) ratio stands at 51. The stock also trades at three times sales. What is known is that Asia needs natural gas to fuel growth, and Europe wants to reduce its dependence on Russian natural gas.
To access America’s vast natural gas reserves, they’ll have few alternatives to LNG’s natural gas terminals.
The Bottom Line on LNG stock
Much like Cheniere gives foreign markets access to American natural gas, Cheniere stock brings investors a vehicle to profit from a newly-formed natural gas export industry. The company beat earnings and revenue estimates for both the 4th quarter and the year.
It also raised guidance for 2018. However, the real benefit comes from future quarters and years that analysts cannot yet see. Europe and Asia need U.S. natural gas to fuel their economies and stay warm. Only five export terminals will exist for years to come. Cheniere stock buys investors into two of those terminals.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
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