Tuesday, Jefferies reduced its rating on Flex (NASDAQ:FLEX) LNG Ltd. (NYSE:FLNG (OL:FLNG)) stock from Hold to Underperform and cut the price target to $23.00 from the previous $32.00. The firm cited concerns over free cash flow generation and potential risks to the company's dividend payout.
Flex LNG, known for its high-quality liquefied natural gas (LNG) shipping services and top-tier fleet, has been recognized for its robust revenue backlog, providing the company with substantial earnings visibility. Despite these strengths, the presence of a spot-linked contract in Flex LNG's portfolio introduces some market exposure, which could impact the company's financial performance.
The company had been distributing an annualized dividend of $3.00 per share. However, the current analysis by Jefferies suggests that the free cash flow generated by Flex LNG falls short of the level needed to sustain this dividend. This shortfall has raised concerns about the future of the dividend payments to shareholders.
Flex LNG's situation highlights the challenges faced by firms when market exposure and cash flow generation do not align with shareholder expectations.
Investors and market watchers will be keeping a keen eye on Flex LNG's financial results and strategic decisions in the coming months, as the company navigates the issues pointed out by Jefferies.
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