A month has gone by since the last earnings report for Cheniere Energy, Inc.LNG . Shares have added about 3.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted 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.
Third-Quarter 2017 Results
Cheniere Energy reported mixed third-quarter 2017 results wherein the company incurred wider-than-expected loss, while revenues topped the Zacks Consensus Estimate.
Cheniere Energy posted net loss of $1.09 per share in the third quarter, much wider than the Zacks Consensus Estimate of a loss of 16 cents. The weaker-than-expected results stemmed from increased costs incurred in the quarter. Further, the loss per share also widened from the prior-year quarter loss of 41 cents.
However, the U.S.-gas exporter's quarterly revenues jumped to $1,403 million from $465 million recorded in the year-ago quarter, reflecting massive jump of 202%. The top line surge led the company's adjusted EBITDA to jump to $442 million against $67 million in third-quarter 2016. Further, the revenue also surpassed the Zacks Consensus Estimate of $1,259 million.
During the quarter, the company shipped 44 cargoes from Sabine Pass liquefied natural gas terminal in Louisiana. Total volumes lifted in the reported quarter were 160 trillion British thermal units.
Costs & Expenses
Overall costs and expenses soared 145.8% to $1,106 million from the same quarter last year. The increase is mainly attributed to the higher cost of sales which jumped to $824 million compared with $253 million in the prior-year quarter. Operating and maintenance expenses rose to $114 million in the quarter, reflecting an increase of 87% from the prior-year figure. Depreciation and amortization expenses also increased from $49 million a year ago to $92 million in the reported quarter. Higher SG&A costs and inclusion of impairment charges also led to increased costs in the quarter under review. Increase in these costs was partly offset by the absence of restructuring expenses incurred in the year-ago quarter.
As of Sep 30, 2017, Cheniere Energy had approximately $919 million in cash and cash equivalents and $24,923 million in net long-term debt. The company's debt to capital ratio is 95.8%.
Cheniere Energy updated its guidance for full-year 2017 despite the wider-than-expected loss. The raised guidance reflects the management's confidence in its construction projects which are much ahead of the schedule. The adjusted EBITDA is expected to be between $1.8 billion and $1.9 billion, 8.8% higher than the prior guidance. Distributable cash flow is likely to be between $600 million and $700 million compared with the prior guidance level of $500-$700 million.
The company also initiated a preliminary guidance for full-year 2018. The adjusted EBITDA is expected to be between $1.9 billion and $2.1 billion. The guidance reflects the management's optimism about strong LNG production at Sabine Pass along with expected improvement in the LNG prices in 2018.
Sabine Pass Liquefaction Project (SPL): Altogether, Cheniere Energy intends to construct up to six trains at Sabine Pass with each train expected to have a capacity of about 4.5 million tons per annum. In October, the company announced the completion of the fourth liquefaction train, which is set for first commercial delivery in March 2018 under a 20-year sale and purchase contract with GAIL (India) Limited. With the completion of Train 4, total capacity at the export terminal has risen from 13.5 million tons per annum (Mtpa) to 18 Mtpa. Train 5 is under construction and is expected to begin exporting in the second half of 2019. Train 6 is being commercialized and has secured the necessary regulatory approvals.
Corpus Christi Liquefaction Project (CCL): Cheniere Energy's Corpus Christi LNG project, under which the company intends to develop three trains, is also expected to come online in 2019. Trains 1 and 2 are under construction, while Train 3 is being commercialized and has the necessary approvals in place.
Corpus Christi Expansion Project: Cheniere Energy intends to develop seven midscale liquefaction trains adjacent to the CCL Project. The company has initiated the regulatory approval process regarding same. The total production capacities for these trains are expected to be approximately 9.5 Mtpa.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been three moves up in the last two months. In the past month, the consensus estimate has shifted by 25.7% due to these changes.
Cheniere Energy, Inc. Price and Consensus
At this time, Cheniere Energy's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is solely suitable for growth investors.
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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