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Cheniere Energy Partners, LP (CQP) Down 8.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Cheniere Energy Partners, LP (CQP - Free Report) . Shares have lost about 8.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cheniere Energy Partners, LP 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 catalysts.

Cheniere Partners Beats Q2 Earnings, Revenues Miss

Cheniere Partners reported second-quarter 2020 earnings per unit of 90 cents, which beat the Zacks Consensus Estimate of 57 cents. Moreover, the figure was higher than the year-ago level of 44 cents. The outperformance was led by lower total operating costs and expenses, as well as higher margins.

However, revenues of $1,470 million were lower than the year-ago level of $1,705 million and missed the Zacks Consensus Estimate of $1,712 million on reduced LNG cargoes sold.

Distribution Hike

The partnership increased quarterly cash distribution from 64 cents per unit to 64.5. The distribution hike during current market uncertainty is expected to send a strong signal to investors about its operational strength.

Operations

The partnership sent 58 cargoes in the second quarter, down from 85 in the year-ago period. Total LNG volumes loaded in the quarter was recorded at 207 trillion British thermal units (TBtu), much lower than the year-ago level of 305 TBtu.

Adjusted EBITDA for the second quarter was recorded at $846 million, up from the year-ago level of $591 million. Profits rose in the second quarter on the back of higher total margins, courtesy of the collected fees of cargoes cancelled by clients.

Costs and Expenses

Cost of sales for the quarter was $398 million, down from the year-ago period’s $880 million. Operating and maintenance expense rose marginally to $165 million from $162 million in second-quarter 2019. Total costs and expenses for the quarter were recorded at $684 million, significantly down from $1,250 million in the June quarter of 2019. 

Cash Flow

Notably, the partnership generated operating cash flow of $339 million in second-quarter 2020, higher than the year-ago level of $296 million.

Balance Sheet

As of Jun 30, 2020, the partnership had only $1,341 million in cash and cash equivalents, down from $1,734 million at first quarter-end. Cheniere Partners had a net long-term debt of $17,566 million, higher than $15,591 million in the first quarter. It had a debt to capitalization ratio of 0.95.

Guidance

The partnership expects full-year 2020 distribution per unit in the range of $2.55-$2.65. The SPL Project Train 6 was 63.9% complete at second quarter-end. Full work on the train is expected to be completed by second-half 2022.

Despite reduced energy demand due to the coronavirus pandemic, the partnership reiterated its full-year 2020 adjusted EBITDA guidance at $3.8-$4.1 billion. Also, it reaffirmed distributable cash flow for the year at $1-$1.3 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -16.31% due to these changes.

VGM Scores

At this time, Cheniere Energy Partners, LP has an average Growth Score of C, a grade with the same score on the momentum front. 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 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cheniere Energy Partners, LP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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