CNX Resources: A Strategic Buy Ahead of Q1 2025 with Momentum and Undervaluation

CNX Resources (CNX) has emerged as a compelling opportunity for investors seeking exposure to energy sector resilience and undervalued equities. Recent earnings surprises, a bullish Zacks Earnings ESP score, and a forward P/E ratio of 14.05 suggest the stock is primed for upside ahead of its July 24, 2025 Q1 report. Let's dissect the data to understand why this could be a high-reward entry point.

Earnings Momentum: Consistent Surprises Signal Operational Discipline
CNX has delivered two consecutive earnings beats, with surprise margins of 32.56% and 21.88% in its last two quarters. This outperformance reflects strong cost management and execution in its core natural gas operations. The company's Q4 2024 results, for instance, saw an EPS of $0.57 against an estimate of $0.43—a 32.56% surprise—despite challenging gas price dynamics.

The Zacks Earnings ESP of +27.51% further bolsters confidence. This metric, which compares the most accurate estimate to consensus forecasts, indicates analysts are raising expectations. Historically, stocks with a Zacks Rank #3 (Hold) and positive ESP beat estimates 70% of the time, suggesting CNX's Q1 2025 results (consensus EPS: $0.65) could exceed expectations.

Valuation Attractiveness: Undervalued Relative to Peers
CNX trades at a forward P/E of 14.05, significantly below its historical averages and many peers. For context, competitors like Range Resources (RRC) trade at 12.8x forward earnings, while Peabody Energy (BTU) trades at 5.12x. However, CNX's forward multiple is justified by its growth trajectory: analysts project a 23.39% EPS increase to $2.69 next year, supported by free cash flow generation and operational leverage.

The stock's PEG ratio of 0.26 also highlights undervaluation relative to growth prospects. Meanwhile, its trailing P/E of -16.56 (due to prior losses) obscures the shift toward profitability. With $75 million in annual free cash flow projected for 2025 and a focus on debt reduction, CNX is stabilizing its balance sheet while positioning for long-term gains.

Operational Strengths: Cost Discipline and Strategic Acquisitions
CNX's Apex Energy acquisition—36,000 acres in the Utica Shale—adds scale and flexibility. The deal includes 8,600 net acres of undeveloped assets, enabling production growth without significant upfront capital. Management plans to keep 2025 capital spending below $500 million, leveraging low-decline PDP wells and operational efficiencies.

Additionally, the company's New Technologies segment, focused on coal mine methane (CMM) monetization, generated $30 million in Q4 2024 free cash flow. Regulatory clarity on CMM's eligibility for hydrogen tax credits (45V) and industrial carbon capture (45Q) could unlock additional revenue streams, especially if the new administration finalizes rules favoring low-carbon energy.

Industry Dynamics: Tailwinds for Natural Gas and Low-Carbon Initiatives
CNX operates in a sector benefiting from secular trends:
1. Natural Gas Demand: Rising industrial and power generation needs, coupled with stable gas prices above $3/MMBtu, support margins.
2. Hydrogen Tax Credits: CMM's role in producing low-carbon hydrogen positions CNX to capitalize on 45V incentives once finalized.
3. Shale Efficiency: CNX's focus on ultra-low-cost production in Appalachia gives it a cost advantage over peers in higher-cost basins.

Risks and Considerations
- Gas Price Volatility: A prolonged drop below $3/MMBtu could pressure margins, though CNX's low-cost structure offers some insulation.
- Regulatory Uncertainty: Delays in CMM policy clarity could delay revenue from tax credits.
- Debt Management: While manageable, CNX's $2.79 billion debt requires disciplined capital allocation.

Conclusion: Buy Ahead of Q1 2025 with a High-Reward Risk Profile
CNX Resources presents a compelling risk-reward trade: a stock trading at 14.05x forward earnings, with 23% EPS growth visibility, operational discipline, and strategic assets. The Q1 report on July 24 offers a catalyst to validate these trends.

Investment Thesis:
- Buy: Accumulate shares ahead of Q1 results, targeting $35–$40 (within striking distance of the $41.00 fair value estimate).
- Hold: Maintain positions if near-term volatility arises, but avoid aggressive calls until post-report clarity.
- Avoid: Only if gas prices collapse or regulatory setbacks materialize.

CNX's blend of earnings momentum, valuation discounts, and exposure to clean energy trends positions it as a standout play in an otherwise challenging energy landscape. The upcoming earnings report is a critical test—but the data suggests this is a bet worth taking.