Flex LNG Ltd. (NYSE: FLNG)

FLNG is likely to exceed its revenue and earnings guidance by a sizable margin in 2026, but the details are not yet knowable.

In addition, the company confirmed that it is trading its three non-contracted vessels into what is presently a very firm spot market, supported by natural gas price dynamics that incentivise longer sailing distances.

If the current high spot T/C rates persist for at least a few months, then FLNG should report substantial earnings growth for Q2-2026.

Based on the supply of new ships and LNG production forecasts, the next cyclical upturn for the LNG shipping industry was not expected to commence until 2027. However, it’s possible that due to the closures of the Strait of Hormuz and Qatar’s LNG production facilities, the cyclical upturn has begun already. At worst, the LNG shipping industry will be able to benefit from much higher T/C rates for a few months.

This situation benefits Flex LNG (FLNG), a member of the TSI Stocks List. Three of FLNG’s 13 vessels are not committed to long-term contracts and therefore have the potential to generate a lot more income in the short-term than previously forecasted by the company. The war-related surge in LNG shipping rates may have occurred too late to make a significant difference to FLNG’s Q1 financial results, but Q2 revenue and earnings have the potential to be much higher than previously expected.

Up to now the FLNG stock price has gained only about 10% in response to the large rise in shipping rates, probably because the overarching expectation throughout the financial world continues to be that the war will end without major ramifications beyond the next few weeks. However, if it starts to look like much higher LNG shipping rates will persist for an extended period, then FLNG’s stock price probably will return to its 2022 high near US$38.00. Also, the company pays a base dividend of US$3.00/share and we expect that it will pay special dividends in addition to this base dividend over the next two years.

FLNG would be a reasonable candidate for new buying in the high-US$20s and a strong buy in the mid-US$20s.

For the quarter and for the year, FLNG’s results were in line with guidance. For example, the company’s Time Charter Equivalent (TCE) rate for the fleet came in at US$71,728/day for 2025, versus guidance of US$71,000 to 72,000/day, while Adjusted EBITDA in 2025 was US$251.1 million, versus guidance of ~US$250 million.

Due to the current softness of the spot market for LNGCs and the fact that in 2026 the company will be exposed to the spot market for up to three vessels, 2026 financial performance is less predictable and could be slightly worse than that of 2025. Specifically, here is FLNG’s 2026 guidance:

Average TCE rate per day: US$65,000-$75,000 (versus US$71,728 in 2025)
Adjusted EBITDA: US$225M-US$255M (versus US$251M in 2025)

A new up-cycle for the LNG shipping industry is likely to begin in 2027, so we expect a large increase in FLNG’s earnings during 2027-2028. In the meantime, it should be viewed primarily as a dividend play.

LNG shipping companies such as FLNG benefit from higher LNG volumes, not higher LNG prices. Therefore, we are bullish on the prospects of FLNG not because we are bullish on the price of LNG (we aren’t), but because the international trading volume of LNG will increase over the next couple of years as new LNG terminals are brought on-line.

A new LNG shipping up-cycle is likely to begin in 2026 or 2027. In the meantime, investors in FLNG get a significant dividend yield (11.2% at the current share price).

The stock has resistance at US$27.50 and then at $30.00, and support at US$24.00-$25.00. A pullback to this support would create a new buying opportunity.

FLNG’s results are very predictable by virtue of the company having locked in most of its revenue for the next few years via long-term contracts.

In Q3-2025, revenue was US$83.6M (versus $84M in the previous quarter) and adjusted earnings per share was US$0.43 (versus $0.46 in the previous quarter). As expected, the company maintained its quarterly dividend at US$0.75/share, which is US$3.00/share annualised and results in a dividend yield of around 11% at last week’s closing price.

Due to ship refinancings, the company ended the September quarter with a record-high US$479M of cash. This is up from US$413M at the end of the preceding quarter, after having paid a $41M dividend during the quarter.

We think that FLNG has valuation-related intermediate-term capital gain potential of about 30% from its current level, but at this stage of the cycle the main reason to own the stock is for the dividend income. Despite the dividend being in excess of earnings, due to its strong balance sheet and long-term charter contracts the company is well positioned to maintain its US$3.00/year base dividend until the start of the next cyclical upturn for the LNG carrier industry, which is expected in 2027. We suspect that by 2028, FLNG will be paying special dividends in addition to its base dividend.

FLNG’s results are very predictable by virtue of the company having locked in most of its revenue for the next few years via long-term contracts. It therefore isn’t surprising that the company remains on track to achieve its annual guidance.

In Q2-2025, revenue was US$86M (versus $88M in the previous quarter) and adjusted earnings per share was US$0.46 (versus $0.54 in the previous quarter). As expected, the company maintained its quarterly dividend at US$0.75/share, which is US$3.00/share annualised and results in a dividend yield of 11% at last week’s closing price.

The company’s balance sheet is in good shape, with US$413M of cash, and is in the process of being strengthened further via the refinancing of debt linked to three ships. One ship was refinanced earlier this year and it is planned that two others will be refinanced during the current quarter, freeing up a total of US$132M.

The stock performed well after its financial results were published last week, but this was due more to general strength in oil/gas shipping stocks than FLNG’s results. As illustrated by the daily chart displayed below, a new intermediate-term upward trend appears to have begun in April-2025.

We think that FLNG has valuation-related intermediate-term capital gain potential of about 30% from its current level, but at this stage of the cycle the main reason to own the stock is for the dividend income. The next cyclical upturn for the LNG carrier industry is expected to begin in 2027.

FLNG’s results are very predictable from quarter-to-quarter and year-to-year by virtue of the company having locked in most of its revenue for the next few years via long-term contracts. It therefore isn’t surprising that for the first quarter of this year, the results were in line with guidance. Of particular significance, revenue was US$88M and adjusted earnings per share came in at US$0.54. As expected, the company maintained its quarterly dividend at US$0.75/share.

The one area of FLNG’s quarterly figures that tends to be volatile is the unadjusted net income, which can experience large swings in response to changes in the market value of the company’s interest-rate hedges. In particular, when interest rates fall from the end of one quarter to the end of the next quarter, the market value of the hedges will fall and this will reduce the net income figure. However, the decline in the market value of the interest-rate hedges is offset by a decline in the cost of the company’s longer-term debt. For this reason, the adjusted net income figure gives a better indication than the net income figure of the profitability of the business.

The company has an opportunity to improve its profitability by refinancing the debt linked to some of its ships, which it is in the process of doing. Also, it has a modest amount of exposure to the spot market via one or two ships that don’t have long-term contracts (spot exposure will be about 15% this year and probably about the same next year, but could increase during 2027-2028 depending on whether Flex’s customers take up the options to extend their contracts). However, it will be a surprise if this year’s revenue and net income deviate significantly from the guidance that was issued in February.

We think that FLNG has valuation-related intermediate-term capital gain potential of about 40%, but at this stage of the cycle the main reason to own the stock is for the dividend income. The next cyclical upturn for the LNG carrier industry is expected to begin in 2027.

By virtue of having locked-in, via long-term contracts, almost all of its revenue for years to come, FLNG’s quarterly earnings from its shipping business tend to be very stable and predictable.

In the latest quarter the company earned US$0.84/share, which was much higher than the preceding quarter’s earnings. However, this figure includes a sizable gain from interest rate hedges. Excluding this extraordinary gain, the company earned US$0.57/share during the December quarter versus US$0.53/share during the preceding quarter. This was a good result, but largely as expected.

Importantly, the company has maintained its US$0.75/share quarterly dividend. The dividend will be paid on 5th March to shareholders of record on 20th February.

FLNG’s financial performance in 2025 is expected to be similar to its performance in 2024.

The stock price has gained about 20% since it was added to the List about two months ago, but nothing else has changed. This means that what we wrote in the 9th December Weekly Update still applies.

Due to the current oversupply of LNGCs, the daily spot charter rates for these ships have plunged to the US$20,000s from several times this level at the same time last year. Furthermore, the oversupply situation is expected to weigh on daily charter rates until 2027, when a low number of new-builds combined with the retirement of old ships sets in motion the next up-cycle for the industry. Why, then, would we be interested in owning FLNG shares now?

The reason is that currently and for the next few years, FLNG has almost no exposure to spot charter rates by virtue of having long-term contracts priced at much higher levels. For example, despite the spot daily charter rate being in the US$20,000s, FLNG will achieve an average charter rate of about US$75,000/day during the final quarter of this year. Moreover, regardless of what happens to spot charter rates, FLNG will achieve an average daily rate of US$75,000-$80,000 during 2025-2026.

FLNG has very good management that is totally focussed on returning money to shareholders. This manifests in the company sending almost all its cash-flow to shareholders in the form of quarterly cash dividends.

Thanks to having locked in relatively high charter rates for its ships, FLNG has been paying a quarterly dividend of US$0.75/share (equivalent to US$3.00 per share annually) and is well positioned to continue this level of dividend payment. At Friday’s closing price of US$21.93, this means that the stock offers a relatively safe dividend yield of 13.7%.

Adding to the attractiveness of FLNG at its current share price is the fact that the book value of its ships is well below the market value of its ships. Based on book value, the company’s equity is about US$14.80/share. However, if we value the ships at market then the equity is about US$31.50/share.

FLNG’s low valuation in terms of dividend level and equity value is, we think, due to market sentiment. We suspect that the stock has sold off due to the depressed levels of spot LNGC daily charter rates, even though the company has almost zero exposure to these rates.

The main reason to own FLNG is for the dividend, but there also is significant potential for capital gain in both the intermediate-term and the long-term. The intermediate-term upside potential simply results from the likelihood that the market won’t allow such a high dividend yield to persist. A more normal yield for a stock such as this would be 8-9%, which would require an increase in the stock price to at least US$33. The long-term upside potential is linked to the likelihood that the next major up-cycle for the LNG carrier industry will begin in 2027.

FLNG has been added to the TSI Stocks List at Friday’s closing price (US$21.93) as a long-term position.