Why Is Cheniere Energy (LNG) Down 4.6% Since its Last Earnings Report?

A month has gone by since the last earnings report for Cheniere Energy, Inc. LNG. Shares have lost about 4.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is 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 its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Cheniere Energy reported strong fourth-quarter results on robust production volumes and strong pricing. The company’s net income per share came in at 54 cents, ahead of the Zacks Consensus Estimate of 49 cents and the comparable 2016 period profit of 48 cents.

The U.S.-gas exporter’s quarterly revenues jumped to $1,746 million from $572 million recorded in the year-ago quarter, reflecting massive jump of 205.2%. The top line surge led to the generation of $523 million as adjusted EBITDA -- against $136 million in fourth-quarter 2016. Further, the revenue also surpassed the Zacks Consensus Estimate of $1,454 million.

During the quarter, the company shipped 70 cargoes from Sabine Pass liquefied natural gas terminal in Louisiana. Total volumes lifted in the reported quarter were 252 trillion British thermal units.

Costs & Expenses

Overall costs and expenses soared 190% to $1,305 million from the same quarter last year. The increase is mainly attributed to the higher cost of sales which jumped to $980 million compared with $229 million in the prior-year quarter, while operating and maintenance expenses rose 87.7% year-over-year to $137 million. Depreciation and amortization expenses also increased from $68 million a year ago to $104 million in the reported quarter.

Balance Sheet

As of Dec 31, 2017, Cheniere Energy had approximately $722 million in cash and cash equivalents and $25,336 million in net long-term debt.

Guidance

Cheniere Energy raised its EBITDA guidance for full-year 2018 following the better-than-expected profit. The upbeat forecast reflects higher-than-anticipated realized margins on marketing volumes. The adjusted EBITDA is now expected to be between $2,000 million and $2,200 million, compared to the prior guidance of anything between $1,900 million and $2,100 million. Meanwhile, distributable cash flow is likely to be between $200 million and $400 million, in line with the previous prediction.

Progress Report

Sabine Pass Liquefaction Project (SPL): Altogether, Cheniere Energy intends to construct up to six trains at Sabine Pass with each train expected to have a capacity of about 4.5 million tons per annum. In October, the company announced the completion of the fourth liquefaction train – on budget and before time. With the completion of Train 4, total capacity at the export terminal has risen from 13.5 million tons per annum (Mtpa) to 18 Mtpa. Train 5 is under construction and is expected to begin exporting in the second half of 2019. Train 6 is being commercialized and has secured the necessary regulatory approvals.

Sabine Pass is North America’s first large-scale liquefied gas export facility. The 2.6 billion cubic feet per day Sabine Pass terminal in Cameron Parish, Louisiana opened in Feb 2016.

Corpus Christi Liquefaction Project (CCL): Cheniere Energy’s Corpus Christi LNG project, under which the company intends to develop three trains, is also expected to come online in 2019. Trains 1 and 2 are under construction, while Train 3 is being commercialized and has the necessary approvals in place. The company made significant headway toward the unit’s final investment decision by signing three long-term Sale and Purchase Agreements – two with PetroChina Company Limited and another with commodity trader Trafigura.

Corpus Christi Expansion Project: Cheniere Energy intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The company has initiated the regulatory approval process regarding same. The total production capacities for these trains are 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. There have been three revisions higher for the current quarter compared to one lower.

Cheniere Energy, Inc. Price and Consensus

 

Cheniere Energy, Inc. Price and Consensus | Cheniere Energy, Inc. Quote

VGM Scores

At this time, LNG has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was also 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, 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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