24Q4 GAAP diluted loss per share was $0.91 and net financial earnings per basic share (NFEPS), a non-GAAP measure, was $0.89. That compares with 23Q4 GAAP EPS of $0.38 and NFEPS of $0.30. I had projected GAAP EPS of $0.94 and NFEPS or $0.92.
The improvement in 24Q4’s NFE vs 23Q4 was due to a big swing in Energy Services (ES) profitability (primarily a benefit from a payment for the release of pipeline capacity under a long-term natural gas supply contract), a smaller loss at New Jersey Natural Gas (NJNG) (during this seasonally slow quarter) and an improvement in Storage and Transportation’s (S&T) earnings. These gains more than offset a 29% decline in Clean Energy Ventures (CEV) earnings and a small loss at Home Services and Other. My projections, which were based upon management’s guidance, were consistent in direction but off somewhat in magnitude with each segment’s profitability.
Management characterized the year as excellent. NJR’s performance was strong in all business segments, except CEV. On Nov. 21, the company reached a settlement with the New Jersey Board of Public Utilities to increase its base rates by $157.0 million, consistent with my expectations of 70% of the requested $220 million. The NJBPU also approved a $4.7 million increase in rates associated with its Infrastructure Investment Program in September. NJR exceeded the high end of management’s original NFEPS guidance range for the fourth consecutive year.
NJR has established fiscal 2025 NFE guidance of $3.05-$3.20 per basic share, up from $2.95 in fiscal 2024. Fiscal 2025 guidance includes an estimated $0.30 benefit from the recently announced sale of Sunlight Advantage, NJR’s residential solar business. NJR’s new NFEPS base is $2.83, the midpoint of a likely range of $2.75-$2.90. The new base marks a new starting point for NJR’s long-term NFEPS growth target of 7%-9%.
Based upon the updated guidance and the $0.30 benefit from the sale of Sunlight Advantage, I now project fiscal 2025 GAAP EPS of $3.13, up from $3.02 previously, and NFEPS of $3.10, up from $3.00. My projections are in line with management’s guidance across all key assumptions, including segment profits, capital expenditures and other cash flow line items (as given in its 24Q4 earnings conference call slide presentation). For fiscal 2026, I forecast GAAP diluted EPS of $3.08 and NFE per basic share of $3.06. (The cash flow items in my 2026 forecast are also consistent with guidance.) Despite the decline in earnings from 2025 to 2026, my projections represent an 8% increase from the new NFEPS base of $2.83, which is consistent with NJR’s NFEPS percentage growth target of 7%-9%.
Since my last report (8/20), NJR’s stock has advanced 12.1%, slightly better than the S&P Mid-Cap 400’s 11.6% gain, but behind the Dow Jones U.S. Gas Utility Index’s 14.8% gain. YTD, the stock is up 14.4% (and its total return is 17.8%), underperforming the price gains of 20.7% for the Mid-Cap 400 and 24.6% for the Dow Jones U.S. Gas Utility Index. The stock has risen sharply over the past month along with the Mid-Cap 400 and peers. It is now hovering around overbought territory, so it is due for a rest (if not a correction).
Based upon my 2026 forecast, I am raising my price target for NJR’s stock from $50 to $54. That equates to 17.7 times projected fiscal 2026 NFEPS of $3.06. The valuation multiple is above the one-year forward price-to-NFEPS multiple of 16.4 times for NJR’s stock, but still below the average of 18.3 for NJR’s peer group. (So the PT implies that NJR’s valuation discount vs. peers will shrink over the next 6-12 months.) The PT represents a potential total return of 9.4% from NJR’s current share price of $51.00, including its 3.5% dividend yield. Accordingly, I am reducing my performance rating from “2’” (Outperform) to “3” (Neutral).
This is a summary of my recent report on New Jersey Resources Corp. (NJR). To obtain a copy of the report, please reach out to me using the contact information provided below.
December 2, 2024 (Report published on December 2, 2024.)
Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com
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