Cheniere Energy, Inc. (LNG) is due to reveal its fiscal 2024 fourth-quarter earnings on February 22. Revenue is forecasted to dip by 50% year-over-year to $4.55 billion. Meanwhile, EPS is anticipated to plummet by 82.6% from the previous year to $2.74.

Additionally, for the fiscal year that ended December 2023, revenue is expected to drop by 40.8% year-over-year to $19.80 billion. However, EPS is projected to surge by 566.1% from the prior year’s period to $37.57.

Despite mixed analyst estimates, the company's prospects for significant growth remain robust due to its strategic and expansive deals. These agreements could position the company favorably, ensuring a solid foundation for future expansion and enhancing its competitive edge in the market.

On November 29, 2023, LNG and Cheniere Energy Partners, LP (CQP) disclosed a significant stride in their financial strategy through the formation of a long-term Integrated Production Marketing (IPM) gas supply agreement with ARC Resources U.S. Corp., a subsidiary of ARC Resources Ltd. (ARX), a prominent Canadian natural gas producer.

The partnership, marking the second long-term IPM deal between LNG and ARC Resources, catalyzes the advancement of the SPL Expansion Project, positioning LNG favorably to capitalize on the burgeoning demand for Canadian natural gas in Europe.

The alignment could further fortify LNG's revenue streams and enhance its financial resilience amidst evolving market dynamics, bolstering its competitive edge in the energy sector.

On November 2, 2023, LNG's subsidiary, Cheniere Marketing, LLC, solidified a lucrative long-term liquefied natural gas sale and purchase agreement with Foran Energy Group Co. Ltd. The 20-year deal, for approximately 0.9 million tonnes per annum, indexed to the Henry Hub price, promises a stable revenue stream bolstering LNG's financial outlook.

LNG shares have gained 7.8% over the past year, closing the last trading session at $160.37. Here are the financial aspects of LNG that could influence its price performance in the near term:

Robust Financials

During the fiscal 2023 third quarter that ended September 30, 2023, LNG’s income from operations stood at $2.78 billion, compared to a loss of $3.02 billion in the prior year’s period.

Moreover, net income and net income per share attributable to common stockholders came in at $1.70 billion and $7.03, respectively, compared to a loss and loss per share of $2.39 billion and $9.54, respectively. As of September 30, 2023, the company’s cash and cash equivalents amounted to $3.86 billion, up from $1.35 billion as of December 31, 2022.

Solid Growth Record

Over the past three years, LNG’s revenue and EBITDA increased at a CAGR of 39.1% and 69.3%, respectively. Its net income and EPS grew at CAGRs of 128.1% and 130.8%, respectively. Moreover, the company’s total assets and levered free cash flow rose at CAGRs of 5.1% and 267.1%, respectively, over the same time frame.

Discounted Valuation

In terms of trailing-12-month P/E, LNG is trading at 3.18x, 69.5% lower than the industry average of 10.42x. Its trailing-12-month EV/EBITDA of 3.09x is 44.1% lower than the 5.53x industry average. Furthermore, the stock’s trailing-12-month Price/Cash Flow of 3.96x is 13.9% lower than the industry average of 4.60x.

Sound Profitability

The stock’s trailing-12-month gross profit margin and trailing-12-month EBITDA margin of 86.74% and 85.84% are 89.5% and 153% higher than the industry averages of 45.77% and 33.93%, respectively.

Moreover, the company’s trailing-12-month net income margin of 50.83% is 292.7% higher than the 12.95% industry average. Also, its trailing-12-month levered FCF margin of 39.76% compare with the industry average of 5.58%.

POWR Ratings Exhibit Solid Prospects

LNG’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LNG boasts a B grade for Value, underscoring its lower-than-industry valuation. Similarly, it secured a B grade for Quality, reflecting its profitability outpacing industry standards.

LNG is ranked #3 out of 83 stocks in the Energy - Oil & Gas industry. Click here to access LNG’s Growth, Momentum, Stability, and Sentiment ratings.

Bottom Line

Despite conflicting analyst evaluations, LNG's strategic alliances herald significant growth opportunities. Arrangements such as the long-term IPM gas supply pact with ARC Resources and the LNG sales contract with Foran Energy Group establish a robust revenue platform, fortifying competitiveness and facilitating future expansion.

Moreover, given its current valuation, stellar profitability, and recent quarter performance, investing in LNG shares appears wise.

How Does Cheniere Energy, Inc. (LNG) Stack Up Against Its Peers?

While LNG has an overall grade of B, equating to a Buy rating, you may check out these other B (Buy) rated stocks within the Energy - Oil & Gas industry: Energy Transfer LP (ET), Secure Energy Services Inc. (SECYF) and Adams Resources & Energy, Inc. (AE). To explore more Energy - Oil & Gas stocks, click here.

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LNG shares were trading at $160.98 per share on Tuesday morning, up $0.61 (+0.38%). Year-to-date, LNG has declined -5.45%, versus a 4.51% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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