Even as the energy sector outpaces the broader market, liquid natural gas specialists like Cheniere Energy (NYSE: LNG) are among the sector’s leaders.
Houston-based Cheniere is up 8.36% in the past three months, and up 38.26% year-to-date. The stock got a boost from its quarterly report on August 4, and is up 16% since then.
Revenue growth has accelerated in each of the past five quarters, from 14% to 165%. In addition to the strong price appreciation, the stock pays a dividend. The company introduced a dividend of $0.33 per share in 2021. The current yield is 0.79%. That’s not much to write home about, but the company also has a share buyback program, which can increase shareholder value.
Natural gas prices fell the week ended September 16, amid a surplus. However, according to U.S. Energy Information Administration, domestic natural gas consumption is expected to increase by 3.6 billion cubic feet per day this year, over last year’s levels.
Of course, any changes in the weather forecast or in actual temperatures can cause natural gas prices to fluctuate.
Mizuho Boosts Price Target
Cheniere got a boost recently, after investment bank Mizuho increased its price target from $167 to $174, according to MarketBeat analyst data. The consensus price target is $179.67, a potential upside of 7.77%. Analysts have a “buy” rating on the stock.
Despite the strong price increases recently, there’s potential for further price growth. The stock re-set its structure low on July 14, with a session low of $120.29. That’s a mini-version of capitulation within one stock, and generally clears out the weak holders while creating an opportunity for those with more conviction to scoop up shares at a lower valuation.
Other natural gas stocks that also undercut prior structure lows recently include Golar LNG (NASDAQ: GLNG ) and Enterprise Products Partners (NYSE: EPD).
Golar owns and operates marine-based liquified natural gas infrastructure. It runs charters of carriers and storage vessels.
The stock advanced 20.05% in the past three months and 110.25% year-to-date. Nonetheless, it’s been pulling back since mid-August, slicing through its 50-day moving average on September 16. It’s essentially been moving in tandem with the S&P 500, giving up early-session gains on Wednesday after the Federal Reserve’s interest-rate decision.
Revenue has been sketchy, although sales grew 25% in the most recent quarter, following declines in six of the past eight quarters. Earnings also picked up in the past two quarters, after losses in the previous six quarters.
A Pivot To Profitability
Here’s where the stock potentially becomes more interesting: Analysts are forecasting earnings per share of $0.94 this year, increasing to $2.11 per share. That’s on the heels of losses every year since 2015.
The earnings forecasts, along with the technical re-set on the chart, may bode well for Golar. With a market cap of just $2.85 billion, Golar is a small cap, meaning it’s prone to be more volatile than a larger stock like Cheniere. In fact, Golar has a beta of 0.82, as opposed to Cheniere’s beta of 0.57. Both are lower than the broader market, but if you choose to buy smaller stocks, be aware they are often more volatile than larger stocks.
Meanwhile, large-cap Enterprise Products Partners has a beta of 0.35. The company is structured as a master limited partnership, meaning it has a hefty dividend yield, of 7.4%. It’s one of the largest midstream oil companies, operating pipelines and processing plants as well as marine-based terminals.
Because of its size and expertise in diverse operations, Enterprise can pursue a number of projects that smaller companies cannot. It’s investing in the petrochemical industry recently.
Volatility across the industry means all these stocks, along with other top price performers like Energy Transfer Partners (NYSE: ET)appear set for more growth, despite any market downdraft due to the Fed or a slower economy.
Watch the charts of these stocks to see if they regain momentum and benefit from upside volatility.