Barclays Initiates CNX Resources with Equal Weight Rating and $33 Price Target

Barclays initiated coverage of CNX Resources with an Equal Weight rating and $33 price target, citing the company's hedging and capital return approach as limiting its flexibility amid emerging upside gas price risk. The analyst views the shares as fairly valued, warning of long-term capital efficiency degradation and core inventory exhaustion risks.

Barclays has initiated coverage of CNX Resources (NYSE:CNX) with an Equal Weight rating and a price target of $33. The investment bank highlights the company's hedging strategy and aggressive share buybacks, which have delivered cash flow stability and reduced the share count by approximately a third since 2021. However, Barclays warns that this strategy now limits flexibility, particularly with 77% of 2026 volumes and nearly 60% of 2027 volumes already locked in at prices well below current futures.

The analyst notes that CNX's elevated leverage of 1.8 times net debt to EBITDAX, compared to a peer average of about 0.5 times, reinforces the need for hedging and further reduces room to maneuver. Barclays also expresses concerns about the company's capital efficiency beyond 2025, noting that a short-term boost from its Apex acquisition and associated wells could mask longer-term challenges.

The firm expects production to decline and capital expenditures to rise from 2026, which may pressure efficiency. CNX's core inventory also appears increasingly stretched, with the most productive, liquids-rich assets in Southwest Pennsylvania nearing exhaustion. Barclays estimates only about eight years of Tier 1 drilling locations remain at current activity levels, with future growth relying more on deeper, higher-cost Utica wells in Central Pennsylvania.

The bank also sees limited upside from CNX's New Technologies unit, which generates about $75 million in annual free cash flow through coal mine methane recovery and renewable energy credits. Regulatory changes, particularly the rollback of hydrogen tax incentives, have curbed growth prospects for this segment.

CNX Resources reported its Q1 2025 earnings, revealing an earnings per share (EPS) of -1.34, which fell short of expectations. However, the company exceeded revenue expectations, reporting $551.09 million compared to the forecasted $517.08 million. The company also announced a leadership change, appointing Alan Shepard as the new President while he continues in his role as Chief Financial Officer. Despite the earnings miss, CNX Resources emphasized its focus on free cash flow per share rather than specific production targets.

Analysts from firms like JPMorgan and ROTH Capital Partners have shown interest in CNX's financial management and capital allocation strategies. The company remains committed to its strategic initiatives and continues to monitor market conditions closely.

References:
[1] https://uk.investing.com/news/stock-market-news/barclays-starts-cnx-resources-at-equal-weight-on-limited-upside-4159741
[2] https://www.investing.com/news/analyst-ratings/cnx-resources-stock-initiated-at-equalweight-by-barclays-on-defensive-strategy-93CH-4123911
[3] https://www.investing.com/news/stock-market-news/barclays-starts-cnx-resources-at-equal-weight-on-limited-upside-4125311