New Fortress Energy Inc. (NFE) is a powerful investment proposition for 2023 in the burgeoning liquified natural gas (LNG) sector, explains Bryan Perry, growth and income expert and editor of Cash Machine.
LNG is the preferred source of fossil fuel over coal-fired and nuclear power sources within countries that have to import energy, China being the largest LNG importer in the world.
New Fortress operates as an integrated gas-to-power infrastructure company that provides energy and development services to end-users worldwide. The company operates in two segments, Terminals and Infrastructure, and Ships.
The Terminals and Infrastructure segment engages in natural gas procurement and liquefaction; the Ships segment offers floating storage and regasification units and LNG carriers which are leased to customers under long-term or spot arrangements. New Fortress has operations in Miami as well as Jamaica, Brazil, Mexico, Puerto Rico and Brazil.
The company is aggressively acquiring assets and established new bases of operations to accommodate the growing demand for LNG in Europe and Asia. Revenues for 2023 are forecast to increase by 52% to $3.95 billion with estimates as high as $5.0 billion. Earnings are set to jump by 229% to $5.66 per share from $1.72.
The NFE story got a further catalyst when on December 13, the company announced an aggressive dividend policy that is set to pay out 40% of free cash flow in 2023 in the form of dividends.
NFE management stated it expects the company to generate more than $11 billion of additional liquidity over the next three years, which it plans to use primarily to facilitate accretive investments, including investments in floating LNG facilities and downstream capital expenditures, and to pay significant dividends to shareholders. The company will pay out a $3.00 dividend in January to initiate the new dividend policy that will vary from quarter to quarter.
With the stock trading around $46 as of this writing, the forward earnings imply the shares are trading with a P/E of about 9X, which is very cheap on valuation basis relative to the stellar forecasted revenue and earnings growth. Only 5 analysts cover the company, and it’s my view that when more research firms get behind this compelling LNG story, the stock will propel higher.