Will High Costs Hurt Golar LNG's (GLNG) Earnings In Q4?
Zacks Investment Research | Feb 24, 2019 08:51PM ET
Golar LNG Limited (NASDAQ:GLNG) is scheduled to report fourth-quarter 2018 results on Feb 27.
In the last reported quarter, the company incurred an adjusted loss of 11 cents per share, in line with the Zacks Consensus Estimate. However, the figure narrowed significantly from a loss of 43 cents incurred a year ago. Meanwhile, total operating revenues of $123 million outpaced the Zacks Consensus Estimate of $87 million and also surged more than 100% year over year.
Notably, Golar LNG is anticipated to continue with this disappointing performance in the quarter to be reported as well. The Zacks Consensus Estimate for the fourth-quarter earnings has been revised downward to the tune of 6.3% over the past 60 days. This reflects the negativity surrounding the stock.
Let’s look into the factors that are likely to influence fourth-quarter 2018 results.
Golar LNG’s high operating expenses are expected to hurt the bottom line in the to-be-reported quarter. The rising costs can be primarily attributed to higher FLNG operating costs for Hilli Episeyo. Also, high depreciation and amortization expenses might prove detrimental to the company’s bottom-line performance. High debt levels are added concerns.
However, Golar LNG's fourth-quarter results are likely to get a boost, courtesy of improvement in shipping activity. Fourth-quarter TCE (Time Charter Equivalent) is expected in the band of $70,000-$80,000, almost double the third-quarter figure of $41,200. We believe that the charter rates will continue the upward trend. Meanwhile, rise in production and ton miles coupled with a structural shortage of ships is likely to enhance the shipping market.
Considering that the rules to check pollution by ships are to be implemented next year, we expect an update regarding Golar LNG’s preparedness on the impending change on the fourth-quarter conference call. Shipping companies like Golar LNG and Frontline Ltd. (NYSE:FRO) may either switch to the highly expensive but lower sulfur marine gasoil or may install scrubbers (air pollution control devices), which would allow them to burn the less expensive high sulfur fuel oil.
What Does the Model Say?
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Zacks Investment Research
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