Earnings call transcript: CNX Resources Q1 2025 sees EPS miss, stock dips

CNX Resources Corp reported a notable deviation from expected earnings in its Q1 2025 results, with an EPS of -1.34, significantly missing the forecast of 0.61. Revenue, however, surpassed expectations at 551.09 million dollars compared to the projected 517.08 million. Following these results, CNX’s stock price fell by 3.82%, reflecting investor concerns over the earnings miss. According to InvestingPro analysis, CNX currently shows a FAIR overall financial health score of 2.37, with particularly strong momentum metrics. The stock appears to be trading below its Fair Value, presenting a potential opportunity for value investors.

Key Takeaways

• CNX Resources reported an EPS of -1.34, missing the forecast by a wide margin.
• Revenue exceeded expectations, reaching 551.09 million dollars.
• The stock price dropped by 3.82% post-announcement.
• The company maintained a robust share buyback program.
• Apex acquisition wells outperformed expectations.

Company Performance

CNX Resources faced a challenging Q1 2025, with earnings significantly below forecasts. Despite this, the company demonstrated resilience in other areas, notably with revenue exceeding expectations. The strategic focus on the Marcellus Shale basin and effective hedging strategies underline CNX’s operational strengths amidst market pressures.

Financial Highlights

• Revenue: 551.09 million dollars, exceeding the forecast of 517.08 million.
• Earnings per share: -1.34, missing the forecast of 0.61.
• Share buyback: 125 million dollars in Q1 2025.

Earnings vs. Forecast

CNX Resources reported an EPS of -1.34, falling short of the anticipated 0.61, marking a significant earnings miss. This represents a deviation of 2.95, highlighting operational or market headwinds. Revenue, however, surpassed forecasts, suggesting strong sales performance.

Market Reaction

Following the earnings announcement, CNX Resources’ stock declined by 3.82%, with a price change of -1.17. This drop reflects investor concerns over the earnings miss, despite positive revenue performance and strategic initiatives like share buybacks. InvestingPro data shows the stock has experienced a -16.58% YTD return, though analyst targets suggest potential upside, with price targets ranging from $21 to $41.

Outlook & Guidance

CNX Resources remains committed to maintaining its production range and strategic focus on free cash flow per share. The company anticipates a production lull in Q3, with additional wells planned for Q4. Guidance on free cash flow remains unchanged, and the company continues to monitor gas prices and storage levels for future activity decisions. InvestingPro analysts anticipate significant sales growth this year, with revenue projected to grow by 71%. Get access to 10 more exclusive ProTips and comprehensive analysis in the Pro Research Report, available to subscribers.

Executive Commentary

"We’re solving for free cash flow per share as opposed to any particular production level target," stated Alan Shepherd, CFO, emphasizing the company’s strategic focus. Nav Bell, COO, highlighted, "The eight wells that we brought online from Apex, they are producing better than we expected," underscoring operational successes.

Risks and Challenges

• Significant EPS miss could impact investor confidence.
• Anticipated production lull in Q3 may affect future revenue.
• Market volatility and gas price fluctuations could influence future performance.
• Potential CapEx adjustments based on market conditions.
• Maintaining competitive positioning amidst industry challenges.

Q&A

Analysts raised concerns about CNX’s activity levels and production trajectory, with Zach Parham from JPMorgan seeking clarity on future plans. Leo Mariani from ROTH inquired about cash taxes and the share buyback strategy, highlighting investor interest in financial management and capital allocation.

Full transcript - CNX Resources Corp (CNX) Q1 2025:

Conference Operator: Good day, and welcome to the CNX Resources First Quarter twenty twenty five Q and A Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tyler Lewis, Vice President of Investor Relations.

Please go ahead.

Tyler Lewis, Vice President of Investor Relations, CNX Resources: Thanks and good morning to everybody. Welcome to CNX’s first quarter Q and A conference call. Today, we will be answering questions related to our first quarter results. This morning, we posted to our Investor Relations website an updated slide presentation and detailed first quarter earnings release data such as quarterly E and P data, financial statements and non GAAP reconciliations, which can be found in a document titled 1Q twenty twenty five Earnings Results and Supplemental Information of CNX Resources. Also, we posted to our Investor Relations Web site our prepared remarks for the quarter, which we hope everyone had a chance to read before the call, as the call today will be used exclusively for Q and A.

With me today for Q and A are Nick Dulius, our President and CEO Alan Shepherd, our Chief Financial Officer and Navne Bell, our Chief Operating Officer. Please note that the company’s remarks made during this call, including answers to questions, include forward looking statements, which are subject to various risks and uncertainties. These statements are not guarantees of future performance, and our actual results may differ materially as a result of many factors. A discussion of the risks and uncertainties related to those factors in CNX’s business is contained in its filings with the Securities and Exchange Commission and in the release issued today. With that, thank you for joining us this morning.

And operator, can you please open the call up for Q and A at this time?

Conference Operator: Thank you. We will now begin the question and answer session. Our first question will come from Zach Parham with JPMorgan. Please go ahead.

Zach Parham, Analyst, JPMorgan: Hey, thanks for taking my question. I guess first just wanted to ask on activity levels. You all had a significant amount of turn in lines in 1Q with 2019. Can you talk about the rest of the turn in lines during the year? When do those come in line?

And maybe comment on what the production trajectory should look like through the back half of the year and maybe into 2026?

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. Hey, this is Alan. A lot of those TILs came in line, called the later part of the first quarter. As we’ve mentioned on the last call, the bulk of some of our completions activity was going be scheduled in the first half of the year. So you’ll see a few more TILs in Q2 and probably a lull in Q3 and then, some additional TILs coming in Q4.

Zach Parham, Analyst, JPMorgan: Thanks. And then just wanted to follow-up. On the 4Q call, you talked about having the flexibility to add some activity to the program in the second half of the year. Given the volatility we’ve seen in gas prices, how are you thinking about flexing that activity? And maybe talk about the timeline on when you would have to make a decision on whether or not to add some activity?

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. Right now, there’s no planned changes to the activity set. We’ll kind of watch it through this part of the shoulder season here and where see where end of summer storage is targeting and go off that as our queue.

Conference Operator: Thanks. Our next question will come from Leo P. Mariani with ROTH Capital Partners. Please go ahead.

Leo P. Mariani, Analyst, ROTH Capital Partners: Hey, just a couple of quick questions here on some of the numbers here. Looks like you guys actually paid some cash taxes in the first quarter, a little bit surprising. Generally thought you guys weren’t going be paying much on the cash tax side. Just curious if that was kind of a one off. And then just on the buyback, kind of very robust number here in first quarter, ’1 hundred and ’20 ’5 million, pretty big number.

I guess, is it fair to think that kind of around this $30 level, you guys think it’s a pretty compelling investment here in the buyback?

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. On the cash taxes front, we’re still a de minimis cash taxpayer. If you’re seeing noise trying to reconcile deferred tax to things, that’s basically from the hedge book. We don’t become a material tax cash payer until, about $3,000,000,000 in cumulative free cash flow, which is the current projections call sometime 27%, twenty eight % as we’ve talked about previously. There is a little bit of state tax starting to hit, but again, that’s all very de minimis.

In terms of your latter question, yes, I think we’re always we see value in kind of the repurchases when we do them as part of our process.

Leo P. Mariani, Analyst, ROTH Capital Partners: Okay. Appreciate that. And I just wanted to ask, if you guys have got any kind of further intel in terms of how Trump administration might be looking at changes in 45Q here?

Alan Shepherd, Chief Financial Officer, CNX Resources: No, we don’t have anything outside of what’s in the public domain.

Tyler Lewis, Vice President of Investor Relations, CNX Resources: Okay. Thank you.

Conference Operator: Our next question will come from Gabe Daoud with TD Cowen. Please go ahead.

Gabe Daoud, Analyst, TD Cowen: Thanks. Hey, good morning everyone. Maybe just following up on Zach’s question earlier. Could you maybe just give us a sense then of what volume trajectory looks like? Imagine just given a heavy first half, you’re declining into the second half and probably into 2026.

So what’s the production level that you guys would like to hold flat into 2026? Is it 1.4 Bs a day on the gas side? And if that’s the case, what’s the CapEx level needed to hold that flat into 2026?

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. I think if you take out the Till comments I made earlier, you can kind of infer from that if you want to do quarterly production. Again, we don’t get too tied up in looking at quarterly production and even annual production levels. We have kind of a range we’ve been in the last few years, and I would expect going forward would be in that sort of range plus the volumes associated with Apex. But again, we’re solving for free cash flow per share as opposed to any particular production level target.

Gabe Daoud, Analyst, TD Cowen: Understood. Thanks for that. And then I guess just as a follow-up, some M and A in your backyard recently, maybe just any kind of updated thoughts on the transaction that just changed hand recently in Westmoreland and generally your views on future opportunities in the area? Thanks guys.

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. No, we think it kind of reinforces what we’ve been saying for the last decade, which is that particular area of the basin is some of the best rock, that’s going to be moving forward. So from our perspective, we have significant acreage position up there, and we’re excited to have a new neighbor that’s kind of validated our thesis on the area.

Gabe Daoud, Analyst, TD Cowen: Got you. Thanks guys.

Conference Operator: Our next question will come from Noah Hungness with Bank of America. Please go ahead.

Noah Hungness, Analyst, Bank of America: Morning, guys. For my first question here, I was hoping to ask you on Slide six. It looks like your NYMEX and NGL pricing has kind of declined as you guys kind of mark to market with strip moving down. And then also the natural gas differentials seem to have widened a bit, but your free cash flow guidance for the year is unchanged. So could you kind of walk us through some of the potential improvements in the base business that’s kind of driving that free cash flow resiliency?

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. So just a reminder, we’re 85% hedged. So when you see the open volumes pricing change, you’re really talking about just, call it, three quarters of exposed pricing at this point on fifteen percent of volume. So there’s not a huge amount of wiggle room associated with open pricing left for the full year. And then the free cash flow guidance we give, it is a point number, but it’s really sort of a range around a number.

So when get overly specific and trying to reanalyze it, we’ll be in that range and we’re reaffirming that range.

Noah Hungness, Analyst, Bank of America: Got it. And then, we’ve seen some power gen and data center announcements in that Southwest Central PA area. And I was just kind of hoping to get your guys’ latest view on how you see in basin demand developing and if you think we’ll continue to see announcements over the next six to twelve months?

Alan Shepherd, Chief Financial Officer, CNX Resources: Yes. In my opinion, think you’re going see a lot of announcements and we’ll see how many of those translate into actual construction. Overall, bullish for all the operators in the basin, very similar to any sort of utility coming in as I’m sure everyone will be able to benefit from the increase in basin demand and shrinking of differentials associated with that. So we’ll see which ones actually develop, but generally a great backwind to have for everyone.

Conference Operator: Sounds good, guys. Thanks. Our next question will come from Jacob Roberts with TPH. Go ahead.

Alan Shepherd, Chief Financial Officer, CNX Resources: Good morning. Good morning.

Jacob Roberts, Analyst, TPH: I was hoping to hear some thoughts about the Apex turn in lines that happened during the quarter, just how those are performing relative to the base business and the outlook there?

Alan Shepherd, Chief Financial Officer, CNX Resources: Hi, ahead.

Tyler Lewis, Vice President of Investor Relations, CNX Resources: Hi, this is Nav. Yes, the eight wells that we brought online from Apex, they are producing better than we expected. So we are pretty optimistic about the long term production on these wells.

Jacob Roberts, Analyst, TPH: Great. Thanks. And my second question, I think you guys have spoken to there not necessarily being a correlation between attribute sales in the Buchanan Power facility. Just hoping to clarify if that facility is showing up on the PJM deactivation list will have any impact on that segment or if there are any other of those types of deactivations we might need to be thinking about?

Alan Shepherd, Chief Financial Officer, CNX Resources: That won’t have any impact on our EA sales. We use multiple facilities across PJM to create those credits.

Jacob Roberts, Analyst, TPH: Thanks. Appreciate the time.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Tyler Lewis for any closing remarks.

Tyler Lewis, Vice President of Investor Relations, CNX Resources: Great. Thank you again for joining us this morning. Please feel free to reach out if anyone has any additional questions. Otherwise, we look forward to speaking with everyone again next quarter. Thank you.

Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.