New Fortress Energy is the IBD Stock Of The Day, as soaring energy needs fuel demand for its services. NFE stock is nearing a buy point.
The New York-based company operates an innovative, integrated strategy based on liquefied natural gas but with an eye toward hydrogen. Tightening sanctions on Russian energy exports are causing significant shifts in global energy supply lines. Meanwhile, economies worldwide are reopening to full capacity post-Covid, and advancing technology is opening new power generation options. New Fortress Energy is scrambling to increase capacity to meet these opportunities.
Launched in 2014, New Fortress develops, finances and builds LNG energy infrastructure assets. NFE builds and operates LNG import facilities to supply natural gas locally, serving energy customers in Jamaica, Ireland, Sri Lanka, Nicaragua and other countries. LNG customers include utilities, manufacturers, food and beverage companies and others.
The company was founded by Wes Edens. Edens is also co-CEO and a founder of global investment management firm Fortress Investment Group, as well as a co-owner of the Milwaukee Bucks National Basketball Association franchise.
NFE Earnings
New Fortress turned from loss to profit in the last two quarters, and revenue growth has exploded. The company posted earnings of $1.13 a share in the March-ended quarter, swinging from a loss of 21 cents a share in the year-ago quarter. Sales skyrocketed 247% year over year to $505.1 million.
While the company's primary focus has been on regions suffering from low-supply, high-cost energy, it has also moved swiftly to make investments in LNG and power facilities to take advantage of the demand gap in Europe and elsewhere as sanctions on Russian energy intensify.
For example, on Wednesday New Fortress and joint venture partner Ebrasil Energy said they agreed to sell their equity investment in Brazilian power company Eneva for $1.29 billion in cash.
The transaction is expected to close in the second half of 2022. The deal is projected to generate proceeds to New Fortress Energy of $550 million.
Filling The Gap From Russian Sanctions
In a recent earnings call with investors, New Fortress CEO Edens said Europe gets about 40%, or 100 million metric tons, of its natural gas from Russia.
"One of the biggest customers in the world all of sudden instantly got short 100 million tons," he said. "But what is crystal clear is that given the choice over time, the Europeans will choose to get their energy from elsewhere and the energy security issues become more pressing than the cost of the energy."
New Fortress Managing Director Andrew Dete figured in the earnings call on May 5 that the company would have to double its output capacity to replace Russian supply.
The energy crisis' impact on fertilizer, and by extension agriculture, will also have a lasting impact on food prices longer term, NFE management added.
NFE Stock
Shares fell 1.6% to $45.84 on the stock market today. NFE stock is in a cup base with a buy point of $49.40, according to MarketSmith chart analysis. The chart is positioned to craft a possible handle on the base, which could lower the entry slightly, to 48.95.
The stock's relative strength line recently hit a new high. Leaderboard stock NFE's RS Rating is 97 out of a best-possible 99, while its EPS Rating is 76.
With a Composite Rating of 99, New Fortress Ranks No. 5 in IBD's Oil & Gas Integrated industry group, behind energy giant Marathon Oil and Imperial Oil.
The company's Accumulation/Distribution Rating is B, indicating moderate buying of its shares by institutional buyers.
Among other energy plays, MRO stock slipped 0.2%, while IMO jumped 1.3%. Chevron added 1%, and Exxon Mobil gained 1.9%.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
