Shares of U.S.-based liquefied natural gas (“LNG”) firm New Fortress Energy NFE slipped to a 52-week low of $8.20 per share last week. Year to date, NFE has lost more than 76% of its value in contrast to the sector’s gain of 7.2%. The company has also fared much worse than other energy storage and transportation operators like Delek Logistics Partners LP DKL and DHT Holdings DHT.

NFE, DKL and DHT Stock Performance Comparison

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New Fortress Energy’s Rising Debt and Interest Obligations

One of the primary concerns for NFE is its mounting debt and associated interest costs. Following the recent issuance of $1.2 billion in senior secured notes, NFE's total bond debt has risen. This will result in additional annual interest payments. This increase in financial obligations could pressure the company's cash flows, particularly as it seeks to manage future debt maturities and operational expenses.

NFE Stockholders Risk Dilution

The company's recent equity offering and agreements with noteholders present a significant risk of shareholder dilution. In the deal, NFE raised $400 million in gross proceeds by issuing 46.3 million new shares at $8.63 each, with CEO Wes Edens purchasing approximately 5.8 million shares. However, this offering could increase the total share count. Preferred stock conversions could further dilute common shareholders. Such dilution risks devalue existing shareholders’ stakes and create selling pressure on the stock.

Delayed Projects and Earnings Misses Hurting NFE Stock

New Fortress Energy has faced delays in bringing its Fast LNG facility in Mexico online, which has negatively impacted its financial performance. The company reported a wider-than-expected adjusted loss of 41 cents per share in the second quarter, against the anticipated profit of 9 cents per share. Furthermore, revenues fell 23.8% sequentially to $428 million, down from $690 million in the first quarter. These delays and earnings shortfalls have raised concerns about NFE’s ability to execute its growth projects effectively.

Analysts Take a Bearish Stance on NFE’s Earnings Outlook

The New York-based energy player has lately been on the receiving end of negative earnings estimate revisions. Looking at the current year, analysts have slashed estimates by 73.4% in the past 60 days. The 2024 Zacks Consensus Estimate is now 54 cents per share, reflecting negative growth of 78.9% relative to the prior year.

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While these bearish factors cannot be ignored, NFE has a few things going in its favor, too.

New Fortress Energy’s Strengthened Liquidity and Debt Restructuring

New Fortress Energy has taken significant steps to improve its liquidity and manage its debt. The recent $400 million equity offering, in which CEO Wes Edens personally invested $50 million, alongside the issuance of $1.2 billion in senior secured notes, has provided much-needed capital. These actions allowed NFE to address near-term debt maturities and raised its effective liquidity. This improved financial position reduces bankruptcy risks and provides a stronger foundation for operational growth.

Strategic Expansion of LNG Exports Helping NFE Stock

One of the key bullish points for NFE is the U.S. Department of Energy's approval for the company to export up to 1.4 million metric tons per year of LNG to non-Free Trade Agreement countries. With the Fast LNG 1 project located offshore Mexico now operational, NFE is positioned to serve global markets. This strategic export capability can boost revenues and expand NFE’s customer base, providing a long-term growth catalyst as global demand for LNG increases.

Final Word: Sell NFE Stock

As we can see, New Fortress Energy is under selling pressure as it faces liquidity issues. Consequently, earnings estimates for this quarter and the year are on the decline, signaling a bearish outlook for the company. With negative sentiment surrounding NFE quite evident, potential investors would be wise to avoid the stock and look for better opportunities elsewhere.

New Fortress Energy currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Delek Logistics Partners, L.P. (DKL) : Free Stock Analysis Report

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