2 Stocks That Doubled Earnings Estimates and Sold Off

 | Aug 08, 2023 08:34AM ET

  • Cheniere Energy is one of the world's leading liquified natural gas companies.
  • Cheniere Energy blew out its Q2 2023 EPS by a whopping $2.80, but revenues fell 48.8% YoY.
  • Cars.com is an online marketplace for car buyers and sellers.
  • Cars.com Q2 2023 EPS was $1.37 versus $0.46 estimates, a whopping 91-cent beat.

    • With the second-quarter 2023 earnings season underway, many earnings reaction trends are taking place. Companies that beat earnings estimates and raise guidance usually see their stocks gap and go higher. Companies that miss estimates and low guidance tend to gap down and dump lower.

    Stocks may also gap on worse-than-expected earnings due to an exceptional result on a certain financial metric and vice versa. However, strange occurrences exist where companies crush their earnings estimates and still gap down on the results. Some reverse reactions to earnings results can be attributed to "sell the news" or "already priced in" factors.

    Here are two companies that doubled earnings estimates and still gapped or sold off lower anyway. These could be potential value plays for investors seeking exposure to stocks with strong fundamentals at a discount.

    h2 Cheniere Energy Inc/h2

    Cheniere Energy (NYSE:LNG) is one of those companies with a stock symbol representing its business line, like C3.ai Inc (NYSE:AI) for artificial intelligence and Samsara (NYSE:IOT) for internet-of-things. Cheniere is a major player in the energy sector's liquified natural gas (LNG) segment. LNG is natural gas cooled into a cryogenic liquid state at -260 degrees Fahrenheit or -160 degrees Celsius.

    Its volume is also 1/600th of its original form when it's liquified. It's not flammable.

    This enables the natural gas to be shipped safely and in volume aboard LNG vessels. LNG is used for various functions like power and heat generation, fuel and chemical production. LNG burns cleaner than fossil fuel producing less pollutants and greenhouse gases. The LNG mark was 380 million tonnes in 2021 and is expected to grow to 500 million tonnes of production in 2030.

    h2 Blowout EPS But Weak Revenues/h2

    Cheniere Energy is a leader in LNG. It procures, liquifies, produces and ships LNG around the world. Its customers range from industrial facilities to regasification plants where the LNG is transformed back into natural gas for usage. The company reported blowout earnings-per-share (EPS) of $5.61 versus $2.81 consensus analyst estimates, a whopping $2.80 beat.

    However, revenues fell 48.8% YoY to $4.1 billion, missing estimates of $4.25 billion. LNG shares trade at 10.86X forward earnings and pays a 0.93% annual dividend rate.