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Cheniere Energy (LNG) Up 6.1% Since Last Earnings Report: Can It Continue?

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Zacks Equity Research
·4 min read
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It has been about a month since the last earnings report for Cheniere Energy (LNG). Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cheniere Energy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cheniere’s Q4 Earnings and Revenues Top Estimates

Chenierereported adjusted earnings per share of 84 cents in the fourth quarter, beating the Zacks Consensus Estimate of 79 cents as well as the year-ago quarter’s earnings of 71 cents, attributable to better-than-expected LNG revenues.  

Meanwhile, revenues from LNG came in at $2,688 million, decreasing 33.3% from the year-ago number of $2,871 million. However, the same beat the Zacks Consensus Estimate of $2,569 million.

Quarterly revenues declined 7.3% to $2.79 billion from $3.01 billion a year ago due to year-over-year fall in LNG revenues. However, the top line outpaced the Zacks Consensus Estimate of $2.66 billion in the quarter under review.

The company posted adjusted EBITDA of $1.05 billion with DCF of around $330 million. During the quarter, Cheniere Energy shipped 130 cargoes, in line with the year-earlier figure. Total volumes of LNG exported were 464 trillion British thermal units (TBtu) compared with 457 TBtu in the prior year.

Costs & Balance Sheet

Overall costs and expenses rose 26.1% from the corresponding quarter of last year to $2,511 million. This rise is mainly attributed to higher cost of sales expenses that climbed 41.3% from the year-ago quarter to $1,866 million. 

As of Dec 31, 2020, Cheniere Energy had approximately $1,628 million in cash and cash equivalents. Its net long-term debt was $30,471 million.

Guidance

Per Jack Fusco, Cheniere Energy’s president and CEO, “We are in the final stages of commissioning Train 3 at Corpus Christi and look forward to placing that project into service in the coming weeks. Additionally, the global LNG market has strengthened significantly since our last quarterly update, improving our outlook for the remainder of the year. Today we are raising our 2021 financial guidance and are confident in our ability to once again deliver reliable financial results this year and to progress on commercializing additional portfolio volumes as well as Corpus Christi Stage 3”.

Cheniere Energy reiterated its outlook for the current year. It anticipates adjusted EBITDA within $4.1-$4.4 billion with distributable cash flow between $1.4 billion and $1.7 billion.

Project Updates

Sabine Pass Liquefaction Project (SPL): Sabine Pass is North America’s first large-scale liquefied gas export facility. Cheniere Energy intends to construct up to six trains at the Sabine Pass with each train’s expected capacity to be 4.5 million tons per annum (Mtpa). Notably, the run-rate of LNG production is projected within 4.7-5 Mtpa. While Trains 1 to 5 are functional, Train 6 is currently under construction with completion estimated within the second half of 2022. 

Corpus Christi Liquefaction Project (CCL): Under this project, the company aims to build three trains, each with a nominal production capacity predicted to be 4.5 Mtpa of LNG. Notably, Train 1 and 2 are functional while Train 3 is under construction. In June 2019, the first commissioned cargo from Train 2 was dispatched. Train 3 is expected to come online in the first half of 2021.

Corpus Christi Expansion Project: Cheniere Energy looks to develop seven midscale liquefaction trains adjacent to the CCL Project. Total production capacity of these trains is assumed to be 10 Mtpa.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -15.78% due to these changes.

VGM Scores

At this time, Cheniere Energy has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cheniere Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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