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Why is Cheniere (CQP) Up Only 1.2% Since Q4 Earnings Beat?

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Cheniere Energy Partners, L.P. (CQP - Free Report) has increased only 1.2% since it reported better-than-expected quarterly results on Feb 24. Although energy demand was earlier expected to significantly recover in 2021, a second wave of coronavirus infections is creating doubts. Some major economies around the world are still suffering from the pandemic. As such, the partnership’s reiteration of its full-year 2021 distribution guidance resulted in muted investor response. Moreover, its levered balance sheet is concerning.

Q4 Results

It reported fourth-quarter 2020 earnings per unit of 77 cents, beating the Zacks Consensus Estimate of 68 cents. However, the earnings figure declined from 87 cents per unit in the year-ago period.

Revenues of $1,997 million were higher than the year-ago level of $1,908 million and beat the Zacks Consensus Estimate of $1,741 million.

The better-than-expected quarterly results were supported by accelerated revenue recognition and additional Trains in operation. Moreover, higher LNG cargoes sold in the quarter boosted the results. The positives were partially offset by lower total margins.

Distribution Hike

The partnership increased quarterly cash distribution from 65 cents per unit to 65.50 cents. The distribution hike amid the current market volatility is expected to send a strong signal to investors about its operational strength.

Operations

The partnership sent 89 cargoes in the fourth quarter, down from 95 in the year-ago period. Total LNG volumes loaded in the quarter was recorded at 318 trillion British thermal units (TBtu), lower than the year-ago level of 335 TBtu.

Adjusted EBITDA for the fourth quarter was recorded at $772 million, up from the year-ago level of $766 million. Profits increased in the fourth quarter on the back of accelerated revenue recognition. Additional Trains in operation also boosted profits. Notably, Cheniere Partners recognized $40 million in revenues from cancelled cargoes.

Costs and Expenses

Cost of sales for the quarter was $954 million, up from the year-ago period’s $873 million. Operating and maintenance expenses increased to $166 million from $160 million in fourth-quarter 2019. Total costs and expenses for the quarter were recorded at $1,372 million, significantly up from $1,232 million in the December quarter of 2019. 

Cash Flow

The partnership generated operating cash flow of $418 million for fourth-quarter 2020, lower than the year-ago level of $570 million.

Balance Sheet

As of Dec 31, 2020, the partnership had only $1,210 million in cash and cash equivalents, down from $1,254 million at third quarter-end. Cheniere Partners had a net long-term debt of $17,580 million, higher than $17,573 million in the third quarter. It had a massive debt to capitalization of 97%.

Guidance

The partnership reiterated its full-year 2021 guidance for distribution per unit in the range of $2.60-$2.70, indicating an increase from the 2020 figure of $2.59. The partnership expects current distributable cash flow per unit in the range of $3.75-$3.95.

The SPL Project Train 6 was 77.6% complete at fourth quarter-end. Full work on the train is expected to be completed by second-half 2022.

Zacks Rank & Key Picks

The partnership currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Berry Corporation (BRY - Free Report) , ConocoPhillips (COP - Free Report) and Pembina Pipeline Corporation (PBA - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Berry’s bottom-line estimates for 2021 have witnessed three upward revisions and no downward movement in the past 60 days.

ConocoPhillips’ sales for 2021 are expected to increase 54% year over year.

Pembina Pipeline’s bottom line for 2021 is expected to increase 28.6% year over year.

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