Rising LNG Exports Will Power US Energy Transition

Key Takeaways

• Rising global demand for LNG and domestic supply constraints position EQT to benefit from supportive pricing, expanded revenue, and strengthened margins.
  
• Infrastructure investments, accretive acquisitions, and ESG focus enhance operational flexibility, cost efficiency, and future shareholder returns.
  
• Structural shifts toward renewables, regulatory pressures, and increased competition threaten EQT’s pricing power, margins, financial flexibility, and long-term earnings potential.

Catalysts

Engages in the production, gathering, and transmission of natural gas.

• EQT is positioned to benefit from the global ramp-up in LNG export demand, driven by the shift toward natural gas as a transitional and diversifying energy source for both developed and developing economies, which is expected to increase realized prices and expand revenue over the coming years.
  
• Structural undersupply of domestic natural gas in the U.S., exacerbated by limited new investment in the sector and delayed supply response from competitors, creates a supportive pricing environment for low-cost leaders like EQT that should drive outsize free cash flow and strengthen margins.
  
• The company’s strategic investments in pipeline/midstream infrastructure and recent accretive acquisitions, particularly the Olympus Energy and Equitrans deals, enhance operational flexibility, reduce corporate price differentials, and unlock new high-margin in-basin demand, all supporting upward revisions to cash flow, EBITDA, and net margins.
  
• Long-term contracts and discussions with major utilities and data center developers for firm gas supply arrangements are expected to provide higher price realizations, reduced volatility, and a robust pathway for sustainable production growth, enabling a re-rating of EQT’s earnings quality and stability.
  
• Ongoing focus on cost efficiencies, integration synergies, and ESG initiatives enables EQT to maintain peer-leading net margins, attract ESG capital at lower costs, and support a capital returns program (dividends and buybacks) that should lift future EPS and shareholder returns as free cash flow generation accelerates.

EQT Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on EQT compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming EQT's revenue will grow by 20.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.6% today to 63.7% in 3 years time.
• The bullish analysts expect earnings to reach $5.7 billion (and earnings per share of $5.35) by about April 2028, up from $230.6 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 11.5x on those 2028 earnings, down from 125.8x today. This future PE is greater than the current PE for the US Oil and Gas industry at 11.4x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

EQT Future Earnings Per Share Growth

Risks

• The accelerating global shift towards renewable energy and utility-scale battery storage, combined with heightened regulatory pressure and carbon taxes, may structurally erode long-term demand for natural gas and diminish EQT’s pricing power, potentially reducing revenues and net margins over time.
  
• Ongoing depletion of the core Marcellus and Utica acreage could result in declining well productivity and increasing finding and development costs, ultimately putting sustained pressure on net margins and long-term earnings.
  
• High financial leverage, evidenced by a forecasted $7 billion net debt at year-end 2025, may limit EQT’s flexibility to invest in new growth opportunities or withstand prolonged periods of low commodity prices, increasing earnings volatility and financial risk.
  
• Growing international competition from low-cost LNG suppliers, such as Qatar and Australia, alongside the limited integrated hedging of EQT’s portfolio, may compress export margins and intensify cash flow volatility, negatively affecting revenue predictability.
  
• Intensifying ESG-focused investing trends and heightened scrutiny of hydraulic fracturing could restrict access to capital, raise operating costs, or trigger stricter regulations and potential bans in key producing regions, directly impacting operating expenses and long-term earnings visibility.

Valuation

• The assumed bullish price target for EQT is $72.75, which represents two standard deviations above the consensus price target of $55.6. This valuation is based on what can be assumed as the expectations of EQT'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 $73.0, and the most bearish reporting a price target of just $35.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $8.9 billion, earnings will come to $5.7 billion, and it would be trading on a PE ratio of 11.5x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $48.57, the bullish analyst price target of $72.75 is 33.2% 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.