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Cheniere Energy (LNG) Up 4.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Cheniere Energy (LNG - Free Report) . Shares have added about 4.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cheniere Energy due for a pullback? 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.

Cheniere Energy Posts Strong Q1 Earnings

After missing earnings estimates in the trailing three quarters, Cheniere Energy, Inc. delivered a comprehensive beat this time around, with both the top and bottom lines surpassing the Zacks Consensus Estimate. The largest U.S. liquefied natural gas exporter reported first-quarter 2019 net earnings per share of 54 cents, significantly beating the Zacks Consensus Estimate of 29 cents. Higher-than-expected revenues on the back of increasing volumes of LNG exports led to the outperformance. Precisely, total LNG revenues came in at $2,143 million, topping the Zacks Consensus Estimate of $1,990 million. However, the bottom line deteriorated from the year-ago profit of $1.50 a share amid increasing y/y operating costs.

Quarterly revenues edged up 1% to $2,261 million from $2,242 million recorded in the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $1,691 million in the quarter under review.

The company posted first-quarter 2019 adjusted EBITDA of $650 million, with DCF of more than $200 million. During the quarter, Cheniere Energy shipped 87 cargoes, reflecting an increase of 30% from a year ago. Total volumes of LNG exported in the reported quarter were 309 trillion British thermal units (TBtu) compared with 241TBtu in the year-ago period.

Costs & Expenses

Overall costs and expenses rose 11% from the corresponding quarter last year to $1,655 million. The increase is mainly attributed to higher cost of sales that scaled up to $1,204 million from $1,178 million in the prior-year quarter, and a 58% year-over-year increase in operating and maintenance expenses to $221 million. Depreciation/amortization and SG&A expenses increased 32% and 9% from the prior-year quarter to $144 million and $73 million, respectively.

Balance Sheet

As of Mar 31, Cheniere Energy had approximately $1,093 million in cash and cash equivalents. It recorded $28,726 million in net long-term debt (with a debt-to-capitalization ratio of 93%).

2019 Guidance Reiterated

Cheniere Energy reiterated its guidance for 2019. It anticipates adjusted EBITDA within $2,900-$3,200 million, with distributable cash flow expected between $600 million and $800 million.

Progress Report

Sabine Pass Liquefaction Project (SPL): Sabine Pass is North America’s first large-scale liquefied gas export facility. Cheniere intends to construct up to six trains at the Sabine Pass, with each train expected to have a capacity of about 4.5 million tons per annum (Mtpa). Notably, expected run-rate LNG production is 4.4-4.9 Mtpa. While Trains 1 through 5 are functional, Train 6 is currently awaiting a positive financial investment decision. Notably, the 5th Train came online during the quarter under review.

Corpus Christi Liquefaction Project (CCL): Cheniere Energy’s Corpus Christi LNG project, under which the company intends to develop three trains, is expected to come online in 2019. Each train is expected to have a nominal production capacity of 4.5 Mtpa of LNG. Train 1 came online during the quarter under review, Train 2 is undergoing commissioning and Train 3 is under construction.

Corpus Christi Expansion Project: Cheniere Energy intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The total production capacity of these trains is 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. The consensus estimate has shifted 71.2% due to these changes.

VGM Scores

Currently, Cheniere Energy has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cheniere Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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