It has been about a month since the last earnings report for Cheniere Energy (LNG). Shares have added about 1.3% 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 drivers.
Cheniere Energy Posts Weak Q4 Earnings
Cheniere Energy reported fourth-quarter 2018 net earnings per share of 26 cents, missing the Zacks Consensus Estimate of 36 cents. The weaker-than-expected results can be attributed to high costs incurred during the quarter. The bottom line also deteriorated from the year-ago income of $0.54 per share.
On an encouraging note, the U.S. gas exporter’s quarterly revenues increased 36.5% to $2,383 million from $1,746 million recorded in the year-ago quarter. Further, the top line surpassed the Zacks Consensus Estimate of $1,780 million in the quarter under review. Its adjusted EBITDA rose to $634 million from $523 million in fourth-quarter 2017.
During the quarter, the company shipped 80 cargoes from the Sabine Pass liquefied natural gas terminal in Louisiana, reflecting an increase of 14% from a year ago. Total volumes of LNG exported in the reported quarter were 285 trillion British thermal units (TBtu) compared with 252 TBtu in the year-ago period.
Costs & Expenses
Overall costs and expenses rose 43% to $1,867 million from the corresponding quarter last year. The increase is mainly attributed to higher cost of sales that jumped to $1,519 million from $980 million in the prior-year quarter, along with a 13.9% year-over-year increase in operating and maintenance expenses to $156 million. Depreciation and amortization expenses decreased from $116 million a year ago to $104 million in the reported quarter.
As of Dec 31, 2018, Cheniere had approximately $981 million in cash and cash equivalents. It recorded $28,179 million in net long-term debt compared with the prior-year level of $25,336. The debt-to-capitalization ratio of the company stands at 93.6%.
2019 Guidance Reiterated
Cheniere has reiterated its guidance for 2019. It anticipates adjusted EBITDA within $2,900-$3,200 million, with distributable cash flow expected between $600 million and $800 million.
Sabine Pass Liquefaction Project (SPL): Sabine Pass is North America’s first large-scale liquefied gas export facility. Cheniere intends to construct up to six trains at the Sabine Pass, with each train expected to have a capacity of about 4.5 million tons per annum (Mtpa). Notably, expected run-rate LNG production is up from 4.3-4.6 Mtpa per train to 4.4-4.9 Mtpa. While Trains 1, 2, 3 and 4 are functional; Train 5 is currently undergoing commissioning. Train 6 is being commercialized and has secured the necessary regulatory approvals. The company expects the fifth train to come online in the first quarter of 2019.
Corpus Christi Liquefaction Project (CCL): Cheniere’s Corpus Christi LNG project, under which the company intends to develop three trains, is expected to come online in 2019. Each train is expected to have a nominal production capacity of 4.5 Mtpa of LNG. Notably, Train 1 and 2 are undergoing commissioning, whereas Train 3 is under construction.
Corpus Christi Expansion Project: Cheniere intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The total production capacity of these trains is expected to be approximately 9.5 Mtpa.
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 17.79% due to these changes.
Currently, Cheniere Energy has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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