SJI reported a 21Q3 GAAP net loss of $25.8 million or $0.23 per share, wider than 20Q3’s net loss of $10.3 million or $0.10. On an economic earnings basis, which adjusts for fluctuations in the fair market value of derivatives and other unusual or one-time costs, the 21Q3 net loss was $18.8 million or $0.17 per share, compared with 20Q3’s net loss of $6.0 million or $0.06 per share. I had anticipated GAAP and economic earnings net losses of $0.16 per share.
The company recorded as adjustments to GAAP earnings a net unrealized mark-to-market loss on derivatives of $19.8 million, which was partially offset by an $11 million gain recorded by Elizabethtown Gas on a settlement of its Uniform Transitional Utility Assessment (UTUA) with the New Jersey Division of Taxation. I had made no provision for either of these items in my projections. Besides these items, the company reported modestly improved results in its utility businesses, lower base profitability in its Energy Management business and a significant decline in the net income of its Energy Production business, due to the non-repeat of last year’s investment tax credits. All of these items were more or less anticipated.
Based upon the shortfalls of actual results from projections, I have lowered my full year 2021 GAAP earnings per share estimate from $0.76 to $0.67 and my economic earnings estimate from $1.67 to $1.63. I have also reduced my 2022 earnings projections (both GAAP and economic earnings) to $1.70 from $1.75.
Since my previous report (dated Sept. 30), SJI’s stock has outperformed the S&P SmallCap 600 Index. Despite the questions raised by its large unrealized 21Q3 derivatives losses, I am maintaining my outperform rating and raising my price target to $27.00 (from $25.00) because the stock remains undervalued vs. peers. SJI recently announced a 2.5% increase in its quarterly dividend to $0.31 per share.
This is a summary of my recent update report on South Jersey Industries, Inc. (SJI). To obtain a copy of the full report, please give me a call.
December 6, 2021
Stephen P. Percoco
16 W. Elizabeth Avenue, Suite 4
Linden, New Jersey 07036
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