Will High Costs Hurt Golar LNG's (GLNG) Earnings in Q4?

Golar LNG LimitedGLNG is scheduled to report fourth-quarter 2018 results on Feb 27.

In the las t report ed quarter, the company incurred an adjusted loss of 11 cents per share, in line with the Zacks Consensus Estimate. However, the figure narrowed significantly from a loss of 43 cents incurred a year ago. Meanwhile, total operating revenues of $123 million outpaced the Zacks Consensus Estimate of $87 million and also surged more than 100% year over year.

Notably, Golar LNG is anticipated to continue with this disappointing performance in the quarter to be reported as well. The Zacks Consensus Estimate for the fourth-quarter earnings has been revised downward to the tune of 6.3% over the past 60 days. This reflects the negativity surrounding the stock.

Let's look into the factors that are likely to influence fourth-quarter 2018 results.

Golar LNG's high operating expenses are expected to hurt the bottom line in the to-be-reported quarter. The rising costs can be primarily attributed to higher FLNG operating costs for Hilli Episeyo. Also, high depreciation and amortization expenses might prove detrimental to the company's bottom-line performance. High debt levels are added concerns.

However, Golar LNG's fourth-quarter results are likely to get a boost, courtesy of improvement in shipping activity. Fourth-quarter TCE (Time Charter Equivalent) is expected in the band of $70,000-$80,000, almost double the third-quarter figure of $41,200. We believe that the charter rates will continue the upward trend. Meanwhile, rise in production and ton miles coupled with a structural shortage of ships is likely to enhance the shipping market.

Considering that the rules to check pollution by ships are to be implemented next year, we expect an update regarding Golar LNG's preparedness on the impending change on the fourth-quarter conference call. Shipping companies like Golar LNG and Frontline Ltd. FRO may either switch to the highly expensive but lower sulfur marine gasoil or may install scrubbers (air pollution control devices), which would allow them to burn the less expensive high sulfur fuel oil.

What Does the Model Say?

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Earnings ESP : Golar LNG has an Earnings ESP of -72.52%. The Most Accurate Estimate is at 14 cents, lower than the Zacks Consensus Estimate by a penny.

Zacks Rank : Golar LNG has a Zacks Rank #4.

Stocks to Consider

Investors interested in the Zacks Transportation sector may check other companies with the right combination of elements to beat estimates in the upcoming releases.

Azul S.A. AZUL has an Earnings ESP of +7.22% and a Zacks Rank #1. The company will release fourth-quarter 2018 results on Mar 14. You can see the complete list of today's Zacks #1 Rank stocks here.

Air Transport Services Group, Inc. ATSG has an Earnings ESP of +9.09% and a Zacks Rank #3. The company will release fourth-quarter 2018 results on Feb 27.

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Golar LNG Limited (GLNG): Free Stock Analysis Report

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AZUL SA (AZUL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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