On Tuesday, CNX Resources Corporation (NYSE:CNX) saw the company's share price target increase by Roth/MKM from $18.00 to $22.00, while the firm maintained a Neutral rating on the stock.
CNX has announced a reduction in its 2024 capital expenditure (CapEx) budget by $50 million, decreasing the range from $575-$625 million to $525-$577 million. This adjustment is a strategic response to the current weak natural gas market, leading the company to defer 11 completions in the Marcellus Shale from 2024 to early 2025.
The company also revised its 2024 production guidance downward by 5%, changing it from 570-590 billion cubic feet equivalent (Bcfe) to 540-560 Bcfe. This change is directly attributed to the deferral of completions. Despite an initial expectation for the lowest production in the first quarter of 2024, CNX now anticipates a continued decline in production over the next few quarters, with the lowest point projected in the third quarter before an expected increase in the winter.
CNX has also refinanced $350 million of its Senior Notes due in 2027 through a successful tender offer and has issued a new $400 million bond due in 2032. The new bond carries the same coupon rate of 7.25% and was priced at par, effectively keeping interest expenses neutral while extending the bond's maturity by approximately five years.
Furthermore, Roth/MKM has adjusted its 2024 cash flow per share (CFPS) estimate for CNX downwards by 7% due to the lower production forecast. However, optimism for potentially higher gas prices in 2025 and beyond has led to the increased price target. CNX continues to focus on its stock repurchase program, with approximately $318 million worth of stock bought back in 2023, and it appears the company will persist with aggressive buybacks in 2024.
In addition to its stock repurchase efforts, CNX remains committed to expanding its new technologies business. The company anticipates that forthcoming clarity on 45B tax credits from the Inflation Reduction Act will provide long-term growth opportunities.
Despite these strategic moves, CNX is currently trading at a premium compared to its peers, with a 7.5x multiple of Roth/MKM's 2024 discounted cash flow estimate and a 4% free cash flow yield based on 2024 estimates, which is slightly below that of its peers.
InvestingPro Insights
Following the recent financial maneuvers and strategic adjustments by CNX Resources Corporation, insights from InvestingPro offer a deeper dive into the company's current market standing. With a strikingly low P/E ratio of 2.27 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at 2.25, CNX is trading at a low earnings multiple, which may appeal to value investors. Additionally, the market cap stands at $4.32 billion, reflecting the company's substantial size within its sector. Despite a significant revenue decline of over 62% in the last twelve months as of Q4 2023, CNX has demonstrated strong returns, with a 49.63% one-year price total return as of day 93 in 2024.
InvestingPro Tips highlight that management's aggressive share buybacks and the stock's low price volatility could be seen as signs of confidence in the company's future. However, with the stock trading near its 52-week high and the RSI suggesting it is in overbought territory, investors may want to proceed with caution. For those seeking more comprehensive analysis, InvestingPro provides an additional 13 tips for CNX. To access these insights and enhance your investment strategy, consider using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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