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CNX Resources to Raise Output, Ups FCF Guidance, Lowers Debt

Zacks Equity Research
·3 min read

CNX Resources Corporation CNX has maintained steady performance and announced plans to increase 2020 free cash flow, resume previously curtailed production, as well as use funds to further lower outstanding debt levels. These developments will help the company create value for shareholders on a continuous basis.

Positive Developments

CNX Resources raised its 2020 free cash flow guidance to $350 million from the prior expectation of $300 million. Last month, the company received $104 million of federal tax refunds, which it expects to use to further pay down its 5.875% notes due 2022, leaving a remaining balance of nearly $250 million, indicating a reduction from $895 million at year-end 2019. This is going to lower the company’s annual interest expenses and debt level. It is steadily lowering the proportion of debt in the capital mix. At second quarter-end, total debt to total capital was 36.1%, down from 36.4% registered in the first quarter of 2020.

CNX Resources expects full-year EBITDAX to be above the high-end of the previously announced range of $830-$900 million. Moreover, the company expects to increase production that was curtailed on Oct 1  to withstand the challenges posed by the unprecedented economic crisis.

Its 2020 capital expenditure is expected to be near the midpoint of the previously announced guided range of $470-$550 million.

These positive developments and other initiatives undertaken by the company will enable it to achieve its seven-year target of generating cumulative free cash flow in excess of $3.3 billion. The strong free cash flow generation will help the company to meet debt obligation during the 2020-2026 time period, improve liquidity and continue with the share buyback program.

Price Performance

In the past 12-month period, the stock has gained 18.7% against the industry’s decline of 45.4%.

Zacks Rank & Stocks to Consider

CNX Resources carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Laredo Petroleum LPI, Cimarex Energy XEC and Pioneer Natural Resources Company PXD. Laredo Petroleum sports a Zacks Rank of 1 (Strong Buy), while the other two stocks have a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Laredo Petroleum, Cimarex Energy and Pioneer Natural Resources delivered average positive earnings surprise of 12.5%, 7.1% and 7.5%, respectively, in the last four reported quarters.

The Zacks Consensus Estimate for Laredo Petroleum, Cimarex Energy and Pioneer Natural Resources’ 2020 earnings has moved 88.2%, 444.4% and 23.6% upward, respectively, in the past 60 days.

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