Bear of the Day: Consol Energy (CNX)
Consol Energy (CNX) has missed the Zacks Consensus Estimate in five of the last six quarters including the most recent 72% negative earnings surprise. CNX is a Zacks Rank #5 (Strong Sell), and it is the Bear of the Day.
Company Description
CONSOL Energy operates in two divisions, Gas and Coal. The Gas division produces and sells pipeline quality natural gas primarily to gas wholesalers. The Coal division is engaged in the mining, preparation, and marketing of thermal coal primarily to customers. CONSOL Energy was founded in 1864 and is headquartered in Canonsburg, Pennsylvania.
Earnings History
As stated, five of the last six quarters has seen CNX come in shy of the Zacks Consensus Estimate. Shy might be an understatement as the most recent miss was a negative earnings surprise of 72% but three quarter prior to that, CNX has a -900% negative earnings surprise.
The September 2013 quarter saw the company post a loss of $0.24 when the Zacks Consensus Estimate was calling for a gain of $0.03. That translated into that huge -900% negative earnings surprise. The quarter before that saw a -116% negative earnings surprise as well.
It should be noted that the March 2014 quarter saw a big beat, a positive earnings surprise of 165% when the company reported earnings that were $0.33 better than expected.
The Aftermath
One might think that the stock would routinely be crushed following such large negative surprises, but the opposite is true. In fact the June 2013 quarter, which was a 116% miss saw the stock trade higher, yes higher, by 10% in the session following the release.
The other quarters with mega misses only saw the stock trade lower by less than 3%. The lone beat in the last six quarters saw the stock advance 6% in the trading session following the report.
Valuation
The coal segment is not one that is seeing good times. The industry averages for PE, forward PE are both negative, so the 96x trailing PE for CNX and the 31x forward PE cannot easily be compared. The 1.7x price to book multiple is well above the 1x industry average while the 2.4x price to sales multiple is triple that of the industry average.
The Chart
The price and consensus chart is a very helpful tool developed by Zacks. It shows how the earnings estimates help guide the stock, so as estimates move higher, the stock price generally follows along. CNX follows this pattern with a defined trend lower in the stock that moves in lock step with the 2015 Zacks Consensus Estimate. Investors would be wise to wait for estimates to start moving higher before investing in this stock.
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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.
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