What Does Billionaire Steve Cohen’s SAC See In EQT Corporation (EQT)?

We’d compare EQT Corporation (NYSE:EQT) to a peer group consisting of natural gas focused E&P companies Chesapeake Energy Corporation (NYSE:CHK) and SandRidge Energy Inc. (NYSE:SD), integrated energy company Cabot Oil & Gas Corporation (NYSE:COG), and natural gas utility ONEOK, Inc. (NYSE:OKE). SandRidge Energy Inc. (NYSE:SD) is expected to be unprofitable both this year and next year- even as revenue has been up over 30%- as the company struggles in the low price environment. According to the most recent data, 15% of the float is held short and it certainly seems to speculative to buy at this time. Chesapeake Energy Corporation (NYSE:CHK) has been in a similar situation, but a string of asset sales has put it in a position where the sell-side is predicting $1.49 in EPS for this year. That implies a current-year earnings multiple of 15, with further upside beyond that point or in the event of a rise in prices, and so Chesapeake Energy Corporation (NYSE:CHK) might be a better way to play natural gas than EQT Corporation (NYSE:EQT).

Cabot has more than doubled in price over the last year, and while net income has also been up strongly this has resulted in some very high earnings multiples. Specifically, the stock trades at 28 times consensus earnings for 2014 and so Cabot Oil & Gas Corporation (NYSE:COG) might best be placed on a watch list to see if performance continues to be excellent. ONEOK, Inc. (NYSE:OKE) is actually priced at a premium valuation as well, with trailing and forward P/Es of 26 and 20 respectively; that seems aggressive from a value perspective, given that net income actually fell in its most recent quarter compared to the same period in the previous year. As a utility, ONEOK, Inc. (NYSE:OKE) pays a dividend yield of a little over 3%.

We’d avoid the stock on that basis, as we would with SandRidge Energy Inc. (NYSE:SD) and Cabot Oil & Gas Corporation (NYSE:COG) (at least until there are positive developments at those companies). EQT’s valuation seems a bit high as well- Chesapeake, even with its recent troubles, seems to be a better buy and surely any rise in natural gas prices (which EQT Corporation (NYSE:EQT) may actually be depending on in order to justify the current price) would benefit that company as well.

Disclosure: I own no shares of any stocks mentioned in this article.