NJR reported 22Q3 GAAP net income of $0.14 per diluted share and a net financial loss (a non-GAAP measure) of $0.04. That compares with the 21Q3 GAAP loss of $1.16, owing to an impairment charge on its investment in the proposed Penn East pipeline, and a net financial loss of $0.15. The company increased its full year net financial earnings (NFE) guidance by $0.10 to $2.40-$2.50, the second such increase this year.
The revised guidance implies 22Q4 NFE of $0.41-$0.51 per share, a big improvement over 21Q4’s $0.07. Although management did not state specifically the drivers for the improved results, I am projecting that earnings gains (or lower losses) will be posted across all five businesses, with Energy Services reversing last year’s $14.4 million loss to NFE of $9.6 million.
Despite the improved 2022 outlook, the company is basing its long-term 7%-9% earnings growth forecast off its original 2022 NFE per share guidance of $2.20-$2.30. As a result, I project 2023 NFE of $2.47, up 1.2% from 2022’s $2.44. Based upon the midpoint of $2.25 of the original guidance range, my projected 2023 NFE represents an increase of 9.8%. The average 2023 earnings growth estimate for peers based upon consensus estimates is 7.6%.
NJR’s stock has outperformed both peers and the broader market in 2022. Yet, it still trades at a modest discount to peers on projected 2023 non-GAAP earnings. My price target of $43.00 applies a one-year forward multiple of 17.5 times to projected 2023 NFE per share of $2.47. Including the 3.9% dividend yield, the price target equates to a potential total return of 11%. Consequently, I have assigned a performance rating of outperform to NJR’s stock.
NJR’s long-term earnings growth aspirations are supported by its plans for mid- to high-single digit growth in rate base at its gas utility, mostly from stepped up infrastructure upgrades and continued growth in its solar electricity generation portfolio. Key risks include debt leverage that is meaningfully above the peer group average, continued increases in natural gas prices that put too much upward pressure on customer monthly bills and potential volatility in the Energy Services business.
This is a summary of my primary report on New Jersey Resources Corp. (NJR). To obtain a copy of the full report, please reach out to me using the contact information provided below.
October 14, 2022
Stephen P. Percoco
16 W. Elizabeth Avenue, Suite 4
Linden, New Jersey 07036
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