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Golar LNG Rallies 27% In A Year: What's Driving the Stock?

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Despite high operating expenses, shares of Golar LNG Limited (GLNG - Free Report) have fared well in a year’s time. The stock has gained 27.5%, against the industry’s decline of 6%.

Reasons for Robust Price Performance

In August, the Hamilton, Bermuda-based midstream LNG company’s top line increased more than 100% on a year-over-year basis. The upside was driven by a 57.5% year-over-year increase in time and voyage charter revenues.

Moreover, Golar LNG benefits from improvement in shipping activity. The upside can be attributed to rise in production and ton miles along with a structural shortage of ships. In fact, the company anticipates third-quarter TCE (Time Charter Equivalent) to double the second-quarter figure of $19,600. Also, the company expects charter rates to witness an uptick from third-quarter levels through 2019. A buoyant scenario related to the European and Japanese LNG prices indicates strong demand for LNG, which will boost U.S. exports.

Furthermore, we are positive about the onset of Hilli Episeyo in May and the financial close of the Sergipe project. The FLNG Hilli Episeyo is the world’s first FLNG vessel developed as a conversion project from an LNG carrier. From the latter half of 2018, the company’s overall results are likely to be boosted by earnings from Hilli. The company is already witnessing a significant increase in free cash flow from the commencement of Hilli Episeyo operations as well as other positive factors.

Additionally, the company’s efforts to reward shareholders in the form of dividends are impressive. Recently, Golar LNG hiked quarterly dividend payment to 12.5 cents per share (50 cents annually) from 5 cents, courtesy of sound financial position, lower capital expenses and the initiation of Hilli Episeyo contract.

Zacks Rank & Key Picks

Golar LNG carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Transportation Sector are ArcBest Corporation (ARCB - Free Report) , Norfolk Southern Corporation (NSC - Free Report) and Trinity Industries, Inc. (TRN - Free Report) . While Norfolk Southern and Trinity Industries carry a Zacks Rank #2 (Buy), ArcBest sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of ArcBest, Norfolk Southern and Trinity Industries have gained 44.2%, 34% and 15.1% in the past six months, respectively.

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