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Golar LNG (GLNG) Down 15.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Golar LNG (GLNG). Shares have lost about 15.5% in that time frame, underperforming the S&P 500.

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

Golar LNG Posts Q1 Loss, Revenues Top

Golar LNG incurred a loss (excluding 4 cents from non-recurring items) of 37 cents in first-quarter 2019, wider than the Zacks Consensus Estimate of a loss of 26 cents. Moreover, the amount of loss increased year over year.

Total operating revenues amounted to $97.8 million, which surpassed the consensus mark of $88.9 million. Also, the top line surged 47.7% year over year.

Of the total revenues, Liquefaction services revenues accounted for the bulk (47.7%) of the company’s top line. While Time and voyage charter revenues decreased 18.6%, Time charter revenues — collaborative arrangement — increased 18.4%. Revenues from Vessel and other management fees declined 10.2% year over year. Time Charter Equivalent ("TCE") earnings decreased to $39,300 per day in the quarter under discussion compared with $77,600 in the prior quarter.

The company reported operating income of $28.86 million in the first quarter compared with $6.43 million in the year-ago period. Total operating expenses soared 70.8% in the quarter to $125.3 million. Vessel operating expenses jumped 69.7% to $31.25 million. This downside was attributable to additional crew, maintenance and repairs expenses.

Liquidity

The company exited the first quarter with cash and cash equivalents of $212.67 million compared with $217.83 million at December 2018 end. As of Mar 31, 2019, its long-term debt totaled $1.59 billion compared with $1.83 billion as of Dec 31, 2018.

Other Developments

The company’s board has decided on a spin-off of its Trifuel Diesel Electric ("TFDE") LNG carrier business so as to focus primarily on FLNG and its downstream assets. Further, at March-end, the company entered into a contract with LNG Hrvtska for the conversion and sale of Golar Viking. The sale is anticipated to fetch the company $40 million in net positive cash.

Outlook

Golar LNG anticipates commissioning of the Sergipe power station to be completed in the second half of this year. Additionally, Golar Power (a subsidiary of Golar LNG) plans to develop the downstream small-scale market in Brazil, which is expected to boost earnings from 2020 or 2021 onward.

The company’s management is positive about its growth potential on the back of an LNG growth rate of approximately 10% pa, a solid rise in contracted earnings, a sound balance sheet and other factors.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 22.45% due to these changes.

VGM Scores

At this time, Golar LNG has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 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 upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Golar LNG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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