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Why Shares of Teekay LNG Are Surging Today

By Lou Whiteman – Nov 14, 2019 at 1:47PM

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A period of investing in expansion is beginning to pay off for the shipping giant.

What happened

Shares of Teekay LNG (TGP) climbed more than 13% on Thursday after the energy-focused shipping company reported quarterly earnings that beat expectations and said a previously delayed regasification terminal located in Bahrain should begin operations before year's end.

So what

Before markets opened Thursday, Teekay LNG reported third-quarter adjusted earnings of $0.55 per share, or $0.51 per share without adjustments, beating the $0.49-per-share consensus analyst estimate. Revenue came in slightly below estimates at $149.7 million but was up 21% year over year.

A tanker viewed from above.

Image source: Getty Images.

CEO Mark Kremin said in a statement that the results were the highest-ever quarterly earnings for Teekay LNG and, on a per-share basis, more than double the earnings the company delivered in the same three months a year prior. Teekay LNG also guided for full-year 2020 earnings of between $2.60 and $3.10 per share, well above the $2.37-per-share consensus, and announced the company would increase its distribution to shareholders beginning in the first quarter of 2020.

"We expect Teekay LNG's results will continue to increase, as reflected in our increased and tightened 2019 guidance range and a new, higher 2020 guidance range issued today," Kremin said. "Based on this foundation of earnings growth expected in 2020, we intend to increase our distributions by 32 percent to $1.00 per common unit per annum."

Kremin also said Bahrain's first liquefied natural gas regasification terminal, which has been delayed at least twice, will open before the end of 2019. Teekay owns a 30% share in the Bahrain venture.

Now what

Companies that serve the energy sector are exposed to the up-and-down nature of the commodity cycle, but Teekay LNG, for the foreseeable future, appears to be in the right place at the right time. There is a real need for liquefied natural gas transport capacity, and Teekay is among the companies best positioned to take advantage of that demand.

Kremin said that after a period of investment in infrastructure and growth, Teekay is "moving from a phase of project execution to a period of significant cash flow generation." Investors are climbing on board as a result.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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