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Cheniere Partners (CQP) Stock Up 37.1% YTD: What's Driving It?
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Cheniere Energy Partners, L.P. (CQP - Free Report) has gained 37.1% in the year-to-date period compared with 8.8% growth of the composite stocks belonging to the industry.
The company, currently carrying a Zacks Rank #3 (Hold), has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days.
Image Source: Zacks Investment Research
Factors Favoring the Stock
Long-term and fixed-fee contracts with clients provide Cheniere Partners with a steady revenue source. Hence, the partnership is least exposed to commodity price fluctuations and generates stable fee-based revenues from the large-scale liquefied natural gas (“LNG”) export facility via contracts.
Cheniere Partners is the largest LNG producer and exporter in the United States. As most industries are seeking ways to lower emissions, the demand for LNG is expected to grow significantly. This will enable the partnership to make massive profits from its export facility. LNG demand from major Asia economies is likely to rise in the coming days, which will boost the demand for Cheniere Partners’ assets.
For 2022, the partnership projects its guidance for distribution per unit at $4-$4.25. Moreover, CQP announced a cash distribution of $1.07 per common unit, suggesting a marginal improvement from the prior distribution. It expects to produce a cumulative $10 billion in distributable cash flow through 2024. This implies that the partnership is thriving since it can afford to pay out more of its profits to shareholders.
The partnership has economic hedges to secure natural gas feedstock for liquefaction projects, which will provide a cushion to its bottom line from volatile commodity prices. The firm is also working toward reducing costs in order to boost the bottom line.
What’s Holding Back the Stock?
As of Sept 30, 2022, the partnership had only $988 million in cash and cash equivalents, and net long-term debt of $15,699 million. Considering the current market challenges, it is likely that the energy firm will face difficulties in paying a portion of the long-term debt due for repayment after 12 months. With a high debt profile and depreciating assets, declining contract tenors can affect its future cash flow, making debt reduction difficult.
BP plc (BP - Free Report) is a fully integrated energy company with a strong focus on renewable energy. BP’s third-quarter adjusted earnings of $2.59 per American Depositary Share on a replacement-cost basis, excluding non-operating items, beat the Zacks Consensus Estimate of earnings of $1.94 per share.
BP is expected to see an earnings rise of 135% in 2022. Before reporting its December-quarter results, BP is willing to complete an additional $2.5 billion in share buybacks. BP boasted that this would make total declared share repurchases from 2022 surplus cash flow $8.5 billion.
Halliburton Company (HAL - Free Report) is one of the largest oilfield service providers in the world. HAL’s third-quarter 2022 adjusted net income per share of 60 cents surpassed the Zacks Consensus Estimate of 56 cents.
HAL is expected to see an earnings surge of 94.4% in 2022. With controlled capital spending and strong demand for its products/services, Halliburton expects to generate strong free cash flows, going forward. We expect the free cash flow to be more than $1.1 billion in 2022, jumping to $1.9 billion in 2023.
MPLX LP (MPLX - Free Report) is a master limited partnership that provides a wide range of midstream energy services, including fuel distribution solutions. MPLX’s third-quarter earnings of 96 cents per unit beat the Zacks Consensus Estimate of 81 cents.
MPLX is expected to see an earnings rise of 29.7% in 2022. MPLX’s distribution per unit was 77.5 cents for the third quarter, indicating a 10% hike from the prior distribution of 70.5 cents.
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Cheniere Partners (CQP) Stock Up 37.1% YTD: What's Driving It?
Cheniere Energy Partners, L.P. (CQP - Free Report) has gained 37.1% in the year-to-date period compared with 8.8% growth of the composite stocks belonging to the industry.
The company, currently carrying a Zacks Rank #3 (Hold), has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days.
Image Source: Zacks Investment Research
Factors Favoring the Stock
Long-term and fixed-fee contracts with clients provide Cheniere Partners with a steady revenue source. Hence, the partnership is least exposed to commodity price fluctuations and generates stable fee-based revenues from the large-scale liquefied natural gas (“LNG”) export facility via contracts.
Cheniere Partners is the largest LNG producer and exporter in the United States. As most industries are seeking ways to lower emissions, the demand for LNG is expected to grow significantly. This will enable the partnership to make massive profits from its export facility. LNG demand from major Asia economies is likely to rise in the coming days, which will boost the demand for Cheniere Partners’ assets.
For 2022, the partnership projects its guidance for distribution per unit at $4-$4.25. Moreover, CQP announced a cash distribution of $1.07 per common unit, suggesting a marginal improvement from the prior distribution. It expects to produce a cumulative $10 billion in distributable cash flow through 2024. This implies that the partnership is thriving since it can afford to pay out more of its profits to shareholders.
The partnership has economic hedges to secure natural gas feedstock for liquefaction projects, which will provide a cushion to its bottom line from volatile commodity prices. The firm is also working toward reducing costs in order to boost the bottom line.
What’s Holding Back the Stock?
As of Sept 30, 2022, the partnership had only $988 million in cash and cash equivalents, and net long-term debt of $15,699 million. Considering the current market challenges, it is likely that the energy firm will face difficulties in paying a portion of the long-term debt due for repayment after 12 months. With a high debt profile and depreciating assets, declining contract tenors can affect its future cash flow, making debt reduction difficult.
Key Picks
Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BP plc (BP - Free Report) is a fully integrated energy company with a strong focus on renewable energy. BP’s third-quarter adjusted earnings of $2.59 per American Depositary Share on a replacement-cost basis, excluding non-operating items, beat the Zacks Consensus Estimate of earnings of $1.94 per share.
BP is expected to see an earnings rise of 135% in 2022. Before reporting its December-quarter results, BP is willing to complete an additional $2.5 billion in share buybacks. BP boasted that this would make total declared share repurchases from 2022 surplus cash flow $8.5 billion.
Halliburton Company (HAL - Free Report) is one of the largest oilfield service providers in the world. HAL’s third-quarter 2022 adjusted net income per share of 60 cents surpassed the Zacks Consensus Estimate of 56 cents.
HAL is expected to see an earnings surge of 94.4% in 2022. With controlled capital spending and strong demand for its products/services, Halliburton expects to generate strong free cash flows, going forward. We expect the free cash flow to be more than $1.1 billion in 2022, jumping to $1.9 billion in 2023.
MPLX LP (MPLX - Free Report) is a master limited partnership that provides a wide range of midstream energy services, including fuel distribution solutions. MPLX’s third-quarter earnings of 96 cents per unit beat the Zacks Consensus Estimate of 81 cents.
MPLX is expected to see an earnings rise of 29.7% in 2022. MPLX’s distribution per unit was 77.5 cents for the third quarter, indicating a 10% hike from the prior distribution of 70.5 cents.