Procore signs multi-year strategic collaboration agreement with AWS
On Friday, JPMorgan analyst Zach Parham revised the price target for CNX Resources (NYSE:CNX) stock, lowering it to $32 from $33, while keeping an Underweight rating on the company’s shares. Currently trading at $27.51, CNX has seen a challenging year with a -25% YTD return, though it maintains a strong +36% gain over the past year. Parham noted that despite CNX’s more capital-efficient guide for 2025 and a fourth-quarter cash flow that exceeded expectations, the company’s shares still underperformed the XOP by 60 basis points on Thursday. According to InvestingPro analysis, the stock’s RSI suggests oversold territory, potentially indicating a buying opportunity for value investors. CNX’s stock has been facing downward pressure since the final rules for the 45V tax credit were issued in early January, which may have left investors seeking clearer strategies for growth in the company’s new tech free cash flow (FCF) over time.
The company’s forecast for fiscal year 2025 indicated a new tech FCF of $75 million, consistent with their previous year’s guidance and aligned with JPMorgan’s model. However, this figure represents a slight decrease from the $83 million in FCF generated in fiscal year 2024. While CNX maintains a solid financial health score of 2.51 (rated as GOOD) on InvestingPro, investors seeking deeper insights can access comprehensive financial health metrics and 12 additional ProTips through the platform’s detailed analysis tools. Management expressed dissatisfaction with the limitations of the final 45V rules during the earnings call, mentioning the possibility of improvements from the current administration and the potential inclusion of 45Q. They also highlighted opportunities in power generation, manufacturing, and data centers but did not provide detailed plans.
Regarding CNX’s AutoSep™ technology, which was initially expected to be tested by a third party in the second half of 2024, the timeline has now been extended. The company stated that the AutoSep equipment is currently being utilized for CNX’s internal operations and is not anticipated to have a significant FCF impact in 2025.
CNX’s capital expenditure guidance for fiscal year 2025 is $475 million, which is substantially lower than JPMorgan and Street estimates, while the projected production is only slightly below those estimates. This efficiency is partly due to deferred turn-in-lines (TILs) on acquired Apex assets and some drilled but uncompleted (DUC) wells on legacy CNX assets. Management also mentioned the flexibility to increase activity in the second half of 2025 to boost volumes if natural gas market conditions remain favorable.
After updating their model, JPMorgan forecasts CNX to produce 612 billion cubic feet equivalent (Bcfe) for $500 million in capital expenditures. They project fiscal year 2025 EBITDA to be $1,167 million, based on recent strip pricing of $3.53 per thousand cubic feet (Mcf), which is slightly below CNX’s guidance of approximately $1,250 million based on $3.86 per Mcf. While currently trading at an EV/EBITDA multiple of 13x, analysts expect the company to return to profitability this year, with an EPS forecast of $1.76 for 2025. JPMorgan estimates that CNX will generate $490 million of FCF in 2025, which translates to a 10% FCF yield and a 7% FCF to enterprise value (EV) ratio. For investors seeking comprehensive valuation analysis, InvestingPro’s detailed research report offers in-depth insights into CNX’s fair value and growth potential, along with expert analysis of key financial metrics.
In other recent news, CNX Resources reported its Q4 and FY 2024 results, showing a robust gross profit margin of 60% and a positive earnings yield of 13%. The company also completed the acquisition of Apex Energy (PA), LLC and related entities for a cash purchase price of $505 million, marking a significant expansion of its operational capabilities in the Appalachian Basin. However, the company’s performance has been under scrutiny by Mizuho (NYSE:MFG) Securities and JPMorgan, both of which downgraded their ratings on CNX’s stock due to concerns about underperformance. In spite of the challenging market environment, short sellers in the energy sector who targeted CNX Resources recorded profits over $100k, indicating an ongoing bearish sentiment. These are recent developments impacting CNX Resources Corporation.
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