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Shares of New Fortress Sink After Earnings

By Tyler Crowe – Oct 29, 2020 at 5:11PM

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The niche power provider's third-quarter results weren't enough to keep Wall Street sticking around

What happened

Shares of natural gas power company New Fortress Energy (NFE -1.33%) are down 13.9% as of 3:45 p.m. EDT today and we're down as much as 19.7% in early morning trading. The stock, which had been on an absolute tear since April, is down after the company reported earnings that didn't impress anyone on Wall Street.

So What 

Prior to today, shares of New Fortress Energy were on a spectacular run, up more than 450% since mid-March. The niche natural gas logistics company was riding the wave of some operational successes and favorable attitudes toward companies with an alternative energy angle.

a small scale LNG facility

Image source: Getty Images.

New Fortress is in the business of delivering power to underserved nations by building small scale natural gas plants at smaller ports. This past quarter, the company reported a net loss of $36.7 million -- $0.21 per share -- and quarterly revenue of $136.9 million. While both of those numbers are a significant improvement from the prior quarters' results, it was still well below Wall Street's expectations of a quarterly profit of $0.12 per share.

Management did note, though, that a large chunk of that net loss was from a $23.5 million charge to retire some of its debt early as part of a big refinancing that happened during the quarter.

Now what

New Fortress is a challenging company to figure out from an investor's perspective because there are almost no good comparisons to this unique business. What it is doing -- owning natural gas regasification terminals at smaller ports and the shipping assets to supply the terminals -- is truly unique. 

There are some signs of promise that this could work. Total natural gas volumes supplied to power plants hit an all-time high in the quarter. It expects that to increase as it expects its third regasification terminal to be operational in the next couple of quarter. It also has two additional terminals under construction with a memorandum of understanding for several more. 

The downside is that these businesses are still creating losses and burning through operational cash, but management has somehow found the money to make acquire a green hydrogen start-up and pay a dividend. 

Management says that it expects to be generating consistent operating margins as its facilities get up to full operating capacity. Until that happens and we see what kind of returns it can generate from a fully operational business, it may be worth holding off on this one.

The Motley Fool has no position in any of the stocks mentioned. Tyler Crowe has no position in any of the stocks mentioned.

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