24Q3 GAAP diluted loss per share was $0.12 and net financial loss per basic share, a non-GAAP measure, was $0.09. That compares with 23Q3 GAAP EPS of $0.02 and net financial earnings per share (NFEPS) of $0.10. I had projected positive EPS and NFEPS. The consensus estimate predicted a net financial loss per share of $0.05.
The swing from 23Q2’s profit to 24Q2’s loss was due to reversals at New Jersey Natural Gas (NJNG) and Clean Energy Ventures (CEV). NJNG’s NFE fell from $0.9 million to a loss of $6.1 million, due to higher O&M expense (higher headcount and technology costs) and depreciation, offset partially by an increase in other income. CEV posted a loss of $6.7 million vs. last year’s $7.3 million profit because of a $16.2 million decline in the income tax benefit from the non-repeat of 23Q3’s deferred tax asset valuation allowance reversal. Energy Services had a slightly higher NFE loss, while Storage & Transportation’s NFE rose. Home Services and Other’s NFE also rose slightly.
Management characterized the quarter as solid and reaffirmed its fiscal 2024 NFE guidance of $2.85-$3.00, which includes a benefit in 24Q4 in Energy Services from the permanent release of pipeline capacity to its customer under an asset management agreement. Even so, with the earnings miss, I have reduced my 2024 estimates for GAAP EPS from $3.02 to $2.95 and NFEPS from $3.00 to $2.95. My projections assume a significant (fourth) quarter of profitability for Energy Services, which is implicit in management’s guidance.
For 2025, I now project GAAP EPS of $3.02, down from $3.04, and NFEPS of $3.00, up from $2.95. NJNG expects a decision from the NJBPU on its pending $220 million base rate increase request before year end. My projections now assume a settlement at roughly 70% of the requested amount and about 75% of that will fall to the bottom line. Thus, I project that NJNG’s operating income will rise by 45% in 2025. Substantially offsetting that is a projected 41% drop in Energy Services’ profits from the pipeline capacity release and lower commodity trading earnings.
My 2025 NFEPS projection of $3.00 is above the current consensus estimate of $2.88 (with a range $2.83-$2.96). Yet, I believe that there is more upside potential to my 2025 estimate than downside risk. While my profit estimates may be a bit aggressive for NJNG, they are probably conservative for Energy Services. Since management has reaffirmed its long-term 7%-9% NFEPS growth target, 2025 should by rights be a year of earnings growth at the high end or above the long-term target given the pending rate case, followed by slowing NFEPS growth in 2026 and beyond.
Based upon my 2025 forecast, I am maintaining my price target of $50 on NJR’s stock. That equates to 16.7 times projected fiscal 2025 NFEPS of $3.00. That valuation multiple is equivalent to the current one-year forward P/E multiple for NJR’s peer group. (So the PT implies that NJR will close its valuation discount vs. peers over the next 6-12 months.) The PT represents a potential total return of 13.3% from NJR’s current share price of $45.62, including its current 3.7% dividend yield. Accordingly, I am maintaining my performance rating of “2’” (Outperform).
Since my last report (7/17), NJR’s stock is down 1.0%, slightly better than the S&P Mid-Cap 400’s 1.9% decline but also behind the Dow Jones U.S. Gas Utility Index’s 0.9% gain. YTD, the stock shows a price gain of 2.3% (and total return of 4.3%), underperforming the price gains of 8.3% for the Mid-Cap 400 and 8.8% for peers (as measured by the Dow Jones U.S. Gas Utility Index). The stock sold off sharply earlier this month around the time of the earnings release, but it has since recovered, along with the broader market. Despite the increased volatility, NJR’s stock remains in an uptrend since bottoming in early February.
This is a summary of my recent update 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.
August 23, 2024 (Report published on August 20, 2024.)
Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250
admin@larkresearch.com
© 2015-2024 by Stephen P. Percoco, Lark Research. All rights reserved.
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