David Einhorn (Trades, Portfolio) sold 7 million shares of his stake in Consol Energy Inc. (CNX, Financial) on June 1.
Consol Energy operates in two divisions, oil and gas exploration and production (E&P) and coal mining. Consol Energy began its operations in 1864 when several western Maryland coal operators decided to “consolidate” their holdings to form the Consolidation Coal Company, but operation was delayed due to the Civil War. Consol Energy's E&P division operates, develops and explores for natural gas primarily in Appalachia (Pennsylvania, West Virginia, Ohio, Virginia and Tennessee). Currently, our primary focus is the continued development of our Marcellus Shale acreage and the delineation and development of our Utica Shale acreage.
Consol Energy has a market cap of $3.63 billion, an enterprise value of $6.97 billion, a P/B ratio of 0.78 and dividend yield of 0.20.
According to GuruFocus Consol Energy has a subpar 4/10 financial strength rating and a 4/10 profitability and growth rating.
Einhorn originally purchased his stake in Consol Energy during the third quarter of 2014. He purchased 4,875,000 shares at an average price of $40.29 per share. Since then the market price of Consol Energy has plummeted by 47%. It traded for $16.86 at midday Wednesday.
Einhorn may have reduced his position in the company for the following reasons:
- Consol Energy has been losing momentum. Its price and revenue per share have been in long-term decline.
Below is a chart for Consol Energy revenue per share.
- Prices for natural gas, natural gas liquids and coal are volatile and can fluctuate widely based upon a number of factors that are outside of Consol Energy's control, which creates a high variance for Einhorn.
Consol Energy's dividend payout ratio has been in long-term decline.
Below is a chart for Consol Energy trailing dividend yield.
- Consol Energy's dividend yield is lower than 98% of the 311 companies in the Global Oil & Gas E&P industry.
- Consol Energy's intrinsic value DCF earnings based has been in long-term decline.
- The company keeps issuing new debt. Over the previous three years, Consol Energy has issued $66.029 million of new debt.
- Consol Energy's EBITDA per share has been plummeting over the previous five years.
- During the past 12 months, the average EBITDA per share growth rate of Consol Energy was -76.20% per year. During the past three years, the average EBITDA per share growth rate was -36.20% per year. During the past five years, the average EBITDA per share growth rate was -22.40% per year.
Below is a Peter Lynch Chart for Consol Energy.
In conclusion
Consol Energy operates in two divisions oil and gas exploration and production and coal mining. The company has been losing a significant amount of momentum since 2014, when Einhorn originally purchased his stake in the company. The company revenue per share has been in long-term decline, and its trailing dividend yield has been in long-term decline as well as the company EBITDA. All of these reasons may have influenced Einhorn to reduce his stake in Consol Energy.
Cheers to your investment success.
Disclosure: Author does not own any shares of this company.
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