A report this week said EQT agreed to buy Range Resources in a transaction valued at $50 billion, and a report said Range’s shares reached their highest level in more than a decade on the news. Neither figure comes from EQT’s own disclosures. The filings analysed here say nothing about deal financing, exchange ratios or integration costs. What they do show, read against this week’s coverage, is useful context for judging the scale of what EQT is attempting.
EQT’s cash conversion was running near a record before the deal
Free cash flow as a share of revenue reached 39.4% over the trailing twelve months to June, a level in the 88th percentile of EQT’s own history. That measure, cash left after capital spending as a proportion of sales, describes what a buyer’s own operations contribute to a transaction before any financing is arranged.
Net income grew far faster than cash in the same year
Over the same trailing period, net income rose 137.1% year on year, while free cash flow rose 77.1%. Those are two measures of the same business moving at different speeds. Operating margin reached 42.5%, up 12.9 percentage points from a year earlier, and net margin reached 28.4%. Revenue growth, meanwhile, slowed to 32.3%, down 51.3 percentage points from the prior quarter’s pace. Slower revenue growth alongside much faster profit growth points to margin expansion, rather than volume, as the main driver of EQT’s reported earnings gain. The filings do not break out which segment, or which change in gas prices versus costs, produced that margin move; that detail sits in the narrative sections of the 10-Q rather than in the structured figures used here.
The diluted share count was already growing before Range entered the picture
EQT’s diluted share count rose 5.9% year on year over the same trailing period, a trend recorded well before the Range Resources transaction was reported. EQT has not yet filed disclosure covering the transaction’s structure, so the filings reviewed here cannot say whether, or by how much, the Range deal itself will add to that trend.
| Measure | TTM value |
|---|---|
| Free cash flow margin | 39.4% |
| Free cash flow margin change YoY | +10.0pp |
| Net income growth | 137.1% |
| Free cash flow growth | 77.1% |
| Diluted share count growth | 5.9% |
An alternative reading is that the net income surge overstates the business’s improving quality: a 137.1% rise in reported profit against a 77.1% rise in cash generation can also reflect non-cash items, timing differences in working capital, or one-off gains that do not recur. The structured figures used here cannot separate those causes from genuine operating improvement; that requires the filing’s full notes to the accounts.
A margin gain this size would move the model more than this quarter’s growth rate
EQT’s cash flow margin rose 10.0 percentage points year on year. Holding that gain at today’s revenue, our model value would move by +32.6%, under the base-case assumptions described below. By comparison, a 5-percentage-point increase in the growth assumption that feeds the model, from a 20.0% base case, would move the value by +32.0%, and a 5-percentage-point cut would move it −25.0%. A 1-percentage-point rise in the discount rate applied to the model would move it −16.8%, and each 1 percentage point of lower free cash flow margin would move it −2.5%. These are model values under stated assumptions, not a comparison with the share price.