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On Tuesday, JPMorgan analyst Zach Parham revised the price target on CNX Resources Corporation (NYSE:CNX) to $33 from the previous $37, while retaining an Underweight rating on the stock. The decision follows CNX's performance as the top-performing Exploration & Production (E&P) company in 2024, with an 83% increase in stock value compared to a 3% decline in the XOP index and a 33% rise among natural gas peers. This surge was attributed to anticipated future Free Cash Flow (FCF) growth through the company's environmental attributes business.
The adjustment in price target comes after a 19% decline in CNX shares since January 2, which contrasts with a 5% increase in the XOP index and a 2% rise among natural gas peers. The drop occurred after the U.S. Department of Treasury issued guidance for the 45V Hydrogen Production Tax Credit, which CNX stated did not offer adequate economic incentives for the company to expand its coal mine methane capture operations.
Despite this, CNX is exploring other regulatory avenues to enhance FCF from methane capture, including the 45Q tax credit.
JPMorgan analysts anticipate further details from CNX management regarding the potential to grow its new technology FCF, including contributions from its AutoSep venture and the Compressed Natural Gas (CNG) business. CNX had previously indicated that AutoSep would offer flowback services to third parties in the second half of 2024, but later suggested a shift in focus to internal operations.
InvestingPro analysis reveals that CNX maintains strong profitability metrics with a gross profit margin of 59.97% and a return on equity of 14%. Subscribers can access 10+ additional ProTips and comprehensive financial metrics through the Pro Research Report.
For the fiscal year 2026, JPMorgan maintains its estimate of $75 million in new technology FCF, consistent with the FY25 guidance.
After updating their model, the analysts expect CNX to report fourth-quarter Cash Flow Per Share (CFPS) and EBITDA slightly below consensus estimates, with CFPS at $1.21 versus the street estimate of $1.23, and EBITDA at $252 million compared to $254 million.
CNX's fourth-quarter production is projected to align with estimates at 1,525 million cubic feet equivalent per day, and capital expenditures are forecasted at $106 million for the quarter.
The pre-hedged gas price realization for CNX in the fourth quarter is estimated at $2.42 per thousand cubic feet, with a differential of $0.37 per thousand cubic feet against the NYMEX benchmark price of $2.79 per thousand cubic feet. JPMorgan forecasts $108 million in fourth-quarter FCF for CNX, which includes working capital changes, and anticipates $74 million in share buybacks during the period.
This follows CNX's reported $7 million in share repurchases in October. While CNX reaffirmed a $300 million FCF guidance for FY24 with its third-quarter release, JPMorgan's estimate stands at $280 million, including a $40 million working capital benefit in the fourth quarter.
In light of recent strip pricing and a revised new technology FCF multiple, JPMorgan reiterated its Underweight rating and lowered the December 2025 price target to $33, based on 80% of their blended Net Asset Value (NAV) calculation. The stock currently trades at an EV/EBITDA multiple of 5.19x and a P/E ratio of 8.06x. Based on InvestingPro's Fair Value analysis, CNX appears to be trading near its fair value.
Investors seeking deeper insights can access the comprehensive Pro Research Report, which includes detailed valuation analysis, peer comparisons, and expert insights.
In other recent news, CNX Resources Corporation has priced a $200 million debt offering to support a pending acquisition and other corporate activities.
The company intends to use the net proceeds from the sale for general corporate purposes, including funding a portion of the transaction costs associated with its pending acquisition of Apex Energy and its affiliates. CNX Resources Corporation has also expressed concerns about the final rules for the Section 45V Hydrogen Production Tax Credit issued by the Treasury Department, stating that they do not provide enough incentive for its hydrogen project.
The company plans to explore alternative incentives for its operations, including voluntary markets, alternative tax incentives, and compliance programs. Meanwhile, Piper Sandler analyst Mark Lear (NYSE:LEA) rates the company as underweight. CNX Resources Corporation has acquired all membership interests in three entities owned by Apex Upstream, LLC, and Apex WML, LLC, in a cash deal valued at $505 million.
Mizuho (NYSE:MFG) Securities has downgraded CNX Resources' stock from Neutral to Underperform, citing a cautious outlook on the company's new ventures. Truist Securities has adjusted its stance on CNX Resources shares twice, initially increasing the stock's price target following the announcement of the Apex Energy acquisition, but later downgrading the stock from Buy to Hold after CNX Resources' third-quarter financial results.
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