EQT Corporation Stock To Rise Over Time?

by Trefis Team
+3.89%
Upside
24.33
Market
25.28
Trefis
BP
BP
Rate   |   votes   |   Share

The shares of EQT Corporation (NYSE: EQT) have gained 27% in the past quarter fairly in-line with the broader energy sector. EQT is the largest producer of natural gas in the U.S. with an average daily sales volume of 4,100 MMCFD – nearly 4% of the total U.S. production. Considering the 40% growth in Henry Hub spot prices and a positive trend observed in natural gas futures price in the past quarter, Trefis believes that EQT stock has room for more growth. The company took multiple cost-cutting measures last year including curtailing production, slashing capex, and suspending dividends to maintain the strength of its balance sheet and preserve cash. We highlight the historical trends in EQT’s revenues, margins, and stock price in an interactive dashboard analysis, Why EQT stock has lost 46% since 2017?

EQT’s revenues have observed a 43% growth from $3.1 billion in 2017 to $4.4 billion in 2019, supported by multiple acquisitions and higher production volumes. As the company’s profitability and capital returns are highly affected by natural gas benchmark prices, its net margins deteriorated due to sizable impairment charges as a result of weak prices. However, the company’s operating cash has been supporting capital expenses and dividend payouts despite low benchmark prices.

While the company has seen steady revenue growth over recent years, its current P/S multiple has dropped substantially due to the pandemic. Given the seasonal rise in natural gas and a positive price outlook by the EIA, we believe the stock has sizable upside potential.

EQT’s P/S multiple changed from 1.9x in 2017 to 0.6x in 2019. While the company’s P/S is now 1.0 there is an upside when the current P/S is compared to levels seen in the past years.

 

Natural Gas Outlook

Weakness in crude oil and natural gas prices is the key concern for the oil & gas industry. However, the steeper decline in working natural gas in storage compared to commercial crude oil inventories is a positive indicator for the natural gas industry. Moreover, the EIA expects the Henry Hub spot price to observe a 40% growth in 2021 opposed to a 30% rise in the WTI benchmark. Broadly, oil, coal, and natural gas account for 32%, 27%, and 24% of the global energy consumption, respectively. With industry leaders including Exxon, Chevron, BP, and Royal Dutch Shell enhancing their low carbon and renewable energy portfolio, the share of natural gas is expected to rise in the long run.

What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!