CNX Resources (CNX) PT Lowered to $32 at JPMorgan

JPMorgan analyst Zach Parham lowered the price target on CNX Resources (NYSE: CNX) to $32.00 (from $33.00) while maintaining a Underweight rating.

The analyst comments "JPM View: Despite a more capital efficient 2025 guide than expected and a 4Q cash flow beat, CNX shares underperformed the XOP by 60 bps yesterday. CNX shares have been under pressure following the issuance of final rules for the 45V tax credit in early January, and we think investors may have been looking for more color on potential pathways to grow new tech FCF over time. CNX guided to FY25 new tech FCF of $75 MM, which was flat vs the FY24 guide and in-line with our model (though down slightly vs the $83 MM in FCF CNX generated in FY24). On the earnings call, management reiterated disappointment in the restrictions included in the final 45V rules and cited the potential for the current administration to improve the rules, as well as the potential for 45Q inclusion. Management also mentioned opportunities within power generation, manufacturing, and data centers, though did not give specific details. On the 2Q24 call, CNX cited that a third party was expected to test AutoSep’s flowback technology in 2H24, though it seems this has now been further pushed to the right with CNX stating that AutoSep equipment was currently being used for CNX’s internal operations with CNX citing no material FCF impact from the AutoSep and CNG businesses is expected in 2025. CNX’s FY25 capex guidance of $475 MM was 20%/21% below JPMe/Street with production only 4%/3% below JPMe/Street. The capital efficient guide is helped by 8 deferred TILs on the recently acquired Apex assets as well as some DUCs on legacy CNX assets (the TIL of a 6-well pad was shifted into early 2025 vs late 2024 with the 3Q print). After updating our model, we forecast that CNX will deliver production of 612 Bcfe for $500 MM in capex. On the call, management highlighted flexibility in the 2025 program to add activity in 2H25 to drive incremental volumes if natural gas macro conditions remained tight. We forecast FY25 EBITDA of $1,167 MM based on recent strip pricing of $3.53 per Mcf. Our estimate compares to CNX’s EBITDA guidance of ~$1,250 MM based on $3.86 per Mcf natural gas. We estimate that CNX will generate $490 MM of FCF in 2025 (10% FCF yield, 7% FCF/EV). After updating our model, we maintain our Underweight rating and reduce our Dec-25 PT to $32 (from $33)."

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