Low-Cost Appalachian Gas Production Will Fuel Expanding Global Demand

Key Takeaways

• Superior cost management and operational execution set CNX apart, enabling expanding margins and earnings resilience regardless of gas price fluctuations.
  
• The company's strategic assets and emerging demand from AI, electrification, and low-carbon markets position it for long-term revenue growth and market leadership.
  
• Structural headwinds from decarbonization trends, regulatory tightening, and technological disruption threaten CNX's volumes, pricing power, and long-term profitability, especially given regional concentration.

Catalysts

An independent natural gas and midstream company, engages in the acquisition, exploration, development, and production of natural gas properties in the Appalachian Basin.

• Analyst consensus expects production efficiency and cost management to drive robust free cash flow per share, but this view underestimates the full impact of CNX's deepening cost advantage; with Utica wells now meeting or beating best-in-basin cost structures and further operational cost reductions likely, CNX is positioned to meaningfully expand net margins even in a volatile gas price environment.
  
• Analysts broadly agree that new in-basin data center and power generation demand will support future gas prices, but the consensus may underappreciate the magnitude and timing of this demand surge; once the first wave of large-scale data centers is physically connected to CNX's infrastructure, a structural support for regional pricing could emerge, underpinning materially higher revenues and cash flow for years as AI and electrification trends accelerate.
  
• The environmental attribute business-including monetization of renewable natural gas from remediated mine gas (RMG)-remains an overlooked growth engine; layering in both compliance and voluntary carbon markets could provide a step-change in free cash flow and diversify earnings sources as tech firms and industrials increasingly pursue low-carbon energy solutions at premium prices.
  
• CNX's prime position in the Appalachian basin, where takeaway constraints are intensifying and new pipeline construction faces regulatory headwinds, means the company's existing firm transportation and midstream assets will become structurally more valuable, supporting improved basis differentials and strengthening long-term revenue reliability.
  
• Accelerating coal-to-gas switching and the expansion of U.S. LNG export capacity create both domestic demand tailwinds and access to higher-priced global markets, setting the stage for sustained production growth, higher realized prices, and enhanced earnings over the next decade as CNX captures market share as a low-cost gas provider.

CNX Resources Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on CNX Resources compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming CNX Resources's revenue will grow by 12.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.6% today to 38.5% in 3 years time.
• The bullish analysts expect earnings to reach $982.0 million (and earnings per share of $7.57) by about August 2028, up from $155.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 5.9x on those 2028 earnings, down from 26.4x today. This future PE is lower than the current PE for the US Oil and Gas industry at 13.3x.
• Analysts expect the number of shares outstanding to decline by 6.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.79%, as per the Simply Wall St company report.

CNX Resources Future Earnings Per Share Growth

Risks

• The long-term global push for decarbonization and renewables may structurally dampen natural gas demand, placing sustained downward pressure on CNX's revenues and realized gas prices despite recent enthusiasm about AI-driven demand growth and data center projects that remain speculative and uncertain in timing.
  
• Increasing environmental regulation, particularly regarding methane emissions and compliance with programs like 45Z, could drive up operating and compliance costs over time, squeezing net margins as new rules come into effect and as credits or incentives potentially phase out or fail to be renewed beyond 2029.
  
• CNX's heavy operational and asset concentration in the Appalachian Basin leaves it exposed to adverse regional regulatory developments, pipeline bottlenecks, or localized market shifts, creating risks to production volumes and revenue stability should regional headwinds emerge.
  
• ESG investing trends and growing investor scrutiny on hydrocarbon-focused companies may further raise CNX's cost of capital or limit access to funding, which could negatively impact future earnings and the ability to pursue capital-intensive growth or buffer financial shocks during periods of low commodity prices.
  
• The risk that technological advances in alternative energies (such as green hydrogen or improved battery storage) may accelerate the displacement of natural gas for power generation and industrial use, materially reducing long-term volumes and pricing power for CNX and impacting top-line revenues and overall profitability.

Valuation

• The assumed bullish price target for CNX Resources is $40.12, which represents two standard deviations above the consensus price target of $32.23. This valuation is based on what can be assumed as the expectations of CNX Resources's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $41.0, and the most bearish reporting a price target of just $26.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.6 billion, earnings will come to $982.0 million, and it would be trading on a PE ratio of 5.9x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $29.06, the bullish analyst price target of $40.12 is 27.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.