Can Cheniere Energy (LNG) Maintain Its Earnings Beat in Q3?
Cheniere Energy, Inc. LNG is set to release third-quarter results on Nov 2. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $2.55 per share on revenues of $3.9 billion.
Let’s delve into the factors that might have influenced the liquefied natural gas (“LNG”) exporter’s performance in the September quarter. But it’s worth taking a look at Cheniere Energy’s previous-quarter performance first.
Highlights of Q2 Earnings & Surprise History
In the last reported quarter, this Houston, TX-based transporter of super-chilled fuel crushed the consensus mark on lower costs and expenses. Cheniere Energy had reported adjusted earnings per share of $5.61 that comprehensively beat the Zacks Consensus Estimate of $2.37. However, the company’s quarterly revenues of $4.1 billion underperformed the Zacks Consensus Estimate by 14.7% due to the year-over-year decrease in cargo shipped and a reduction in volumes and prices.
LNG beat the Zacks Consensus Estimate for earnings in each of the last four quarters, resulting in an earnings surprise of 104.5%, on average. This is depicted in the graph below:
Cheniere Energy, Inc. Price and EPS Surprise
Cheniere Energy, Inc. price-eps-surprise | Cheniere Energy, Inc. Quote
Trend in Estimate Revision
The Zacks Consensus Estimate for the third-quarter bottom line has remained unchanged in the past seven days. The estimated figure indicates a 67.3% fall year over year. Meanwhile, the Zacks Consensus Estimate for revenues suggests a 56% decrease from the year-ago period.
Factors to Consider
While LNG shipments for export from the United States have been robust for months on the back of environmental reasons, high prices of the super-chilled fuel elsewhere and the Russia-Ukraine conflict, demand for the fuel has come down from their highs achieved earlier this year. This means that LNG deliveries are poised to fall slightly. This does not augur well for Cheniere Energy — the dominant U.S. LNG exporter — in the to-be-reported quarter.
As proof of this tepid backdrop, our projection for third-quarter LNG volumes loaded is pegged at 534 trillion British thermal units (TBtu), suggesting a drop from the year-ago level of 559 TBtu. This should have dragged down the company’s revenues and cash flows.
Moreover, a dip in LNG realizations is also likely to have hurt Cheniere Energy’s revenues and cash flows. Going by our model, the company’s third-quarter average LNG revenues estimate is pegged at $3.6 billion — significantly down from the year-earlier level of $8.2 billion. This is primarily because of a drop in natural prices of late.
On a somewhat positive note though, the fall in Cheniere Energy’s costs might have buoyed its to-be-reported bottom line. In particular, our estimate for cost of sales is pegged at $1.9 billion, indicating an 82.8% decline from $11.1 billion reported in the year-ago quarter. Our model also predicts the company’s operating and maintenance expenses to go down 25.6% year over year to $311.9 million. The downward cost trajectory could be attributed to the company’s successful expense management initiatives.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Cheniere is likely to beat estimates in the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for this company is -15.69%.
Zacks Rank: LNG currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Cheniere Energy, here are some firms from the energy space that you may want to consider on the basis of our model:
Diamondback Energy FANG has an Earnings ESP of +0.84% and a Zacks Rank #3. The firm is scheduled to release earnings on Nov 6.
Over the past 90 days, Diamondback Energy saw the Zacks Consensus Estimate for 2023 move up 6.4%. Valued at around $28.6 billion, FANG has gained 1.9% in a year.
Civitas Resources CIVI has an Earnings ESP of +7.46% and a Zacks Rank #2. The firm is scheduled to release earnings on Nov 7.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Civitas Resources beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of 2.7%, on average. Valued at around $7 billion, CIVI has gained 7.4% in a year.
Delek US Holdings DK has an Earnings ESP of +5.26% and a Zacks Rank #2. The firm is scheduled to release earnings on Nov 7.
Over the past 90 days, Delek US Holdings saw the Zacks Consensus Estimate for 2023 move up 26.5%. Valued at around $1.6 billion, DK has lost 14.7% in a year.
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