Why Is Cheniere Energy (LNG) Down 4.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Cheniere Energy (LNG). Shares have lost about 4.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cheniere Energy due for a breakout? 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 Robust Y-o-Y Results, View Lifted

Cheniere Energy reported third-quarter 2018 net earnings per share of 26 cents, marginally missing the Zacks Consensus Estimate of 27 cents. The weaker-than-expected results can be attributed to high costs incurred during the quarter. However, the bottom line turned around from the year-ago quarter’s net loss of $1.09 on the back of increased operations from the additional trains in the Sabine Pass project.

The U.S. gas exporter’s quarterly revenues increased 29.6% to $1,819 million from $1,403 million recorded in the year-ago quarter. As such, its adjusted EBITDA rose to $569 million from $442 million in third-quarter 2017. Further, the top line surpassed the Zacks Consensus Estimate of $1,497 million in the quarter under review.

During the quarter, the company shipped 65 cargoes from the Sabine Pass liquefied natural gas terminal in Louisiana, reflecting an increase of 48% from a year ago. Total volumes of LNG exported in the reported quarter were 228 trillion British thermal units (TBtu) compared with 160 TBtu in the year-ago quarter.

Costs & Expenses

Overall costs and expenses rose 26% to $1,394 million from the same quarter last year. The increase is mainly attributed to higher cost of sales that jumped to $1,027 million from $824 million in the prior-year quarter, along with a rise in operating and maintenance expenses by 49% year over year to $170 million. Depreciation and amortization expenses also increased from $92 million a year ago to $113 million in the reported quarter.

Balance Sheet

As of Sep 30, 2018, Cheniere had approximately $989 million in cash and cash equivalents. It recorded $27,438 million in net long-term debt compared with the prior-year level of $25,336. The debt-to-capitalization ratio of the company now stands at 93.7%.

2018 Guidance Up, 2019 Outlook Initiated

Cheniere raised its EBITDA guidance for full-year 2018 and provided preliminary guidance for 2019. Adjusted EBITDA is now expected in the band of $2,450-$2,550 million compared with the prior forecast of $2,300-$2,500 million. Distributable cash flow is now projected between $500 million and $600 million vis a vis the previous guided range of $400-$550 million.

For 2019, the company anticipates its adjusted EBITDA within $2,900-$3,200 million, with distributable cash flow expected between $600 million and $800 million.

Progress Report

Sabine Pass Liquefaction Project (SPL): Sabine Pass is North America’s first large-scale liquefied gas export facility. Altogether, 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. Train 1 is undergoing commissioning, whereas Train 2 and 3 are 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?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -19.76% due to these changes.

VGM Scores

Currently, Cheniere Energy has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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