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NJR

New Jersey Resources NYSE:NJR Stock Report

Last Price

US$38.70

Market Cap

US$3.7b

7D

-9.5%

1Y

8.7%

Updated

30 Sep, 2022

Data

Company Financials +
NJR fundamental analysis
Snowflake Score
Valuation4/6
Future Growth1/6
Past Performance4/6
Financial Health1/6
Dividends4/6

NJR Stock Overview

New Jersey Resources Corporation, an energy services holding company, provides regulated gas distribution, and retail and wholesale energy services.

New Jersey Resources Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for New Jersey Resources
Historical stock prices
Current Share PriceUS$38.70
52 Week HighUS$47.50
52 Week LowUS$34.84
Beta0.55
1 Month Change-12.32%
3 Month Change-14.93%
1 Year Change8.71%
3 Year Change-11.01%
5 Year Change-9.58%
Change since IPO749.51%

Recent News & Updates

Sep 30

New Jersey Resources: A Compounder With Some Downside Remaining

Summary New Jersey Resources has been a strong long-term compounder, with diversification into non-regulated activities helping growth. With more debt in recent years, some points to monitor as this may impact future dividend growth rates. Keep New Jersey Resources on the watchlist and look to start a position to grow income if prices head lower; there remains a limited downside here. New Jersey Resources (NJR) is an energy services holding company. It has regulated and non-regulated operations. New Jersey Natural Gas is a regulated utility that delivers natural gas to 570,000 customers in New Jersey. The NJR non-regulated operations include retail gas supply and solar investments, primarily in New Jersey. Furthermore, NJR has equity investments in several large midstream gas projects. As a quick overview NJR remains a largely regulated utility provided, with much of the net financial earnings per share derived from the New Jersey Natural Gas utility (Figure 1). In the Q3 earnings presentation, NJR notes that the utility added 1695 customers during the quarter. However, there is also a reasonable level of earnings from the Clean Energy Ventures (for example, with over 675MW of projects under construction or contract through to 2027). The Adelphia Gateway for storage and transportation should be on track to reach completion soon. Together, these sources of revenue provide a reasonably diversified gas utility option with good growth potential. Figure 1. NJR's fiscal 2022 NFEPS guidance, by segment (Q3 Earnings Presentation) Recent results and operations NJR released news a couple of weeks ago that its quarterly dividend would be raised from $0.36 per share quarterly to $0.39, a 7.6% increase. A raised dividend is often a safe one, as we might assume that a raise would be tempered or avoided if there were future financial concerns. On the Q3 earnings call in early August, they noted: As a result, we are increasing our previously announced guidance for fiscal 2022 by $0.10. This marks our second guidance increase for this year. To summarize a few highlights, New Jersey Natural Gas added nearly 1,700 new customers. In July, Clean Energy Ventures placed an 8-megawatt project into service. Energy Services reported significant improvement in NFE in the third quarter as a result of our asset management agreement. NJR notes that the NFEPS expects to grow by 7% to 9%, along with the dividend. Concerns to monitor for NJR While I fundamentally like this company, I note that they have had several recent years with declining sales figures, coupled with several years now of steadily increasing long-term debt levels. Heading into more tricky economic periods, this type of additional leverage is probably going to seem manageable now but will, I expect, begin to bite and force allocation decisions later that may limit the long-term dividend increases. What does this mean for NJR? The debt level has lifted considerably since 2015 (Figure 2). The impact since 2020 has also lifted the financial debt-to-equity ratio to a level higher than any in the last twenty years. I suspect they may have used the 202 and 2021 issuances, with long-term maturities, and taken advantage of the favorable rates, as suggested in the 2021 annual report. It does, however, leave them in a position with a more sizable long-term debt than they had previously, but also with the opportunity to continue to invest and diversify their revenue further in the future. Data by YCharts Figure 2. Visualizations of debt and debt to equity highlighting my concerns (Source: YCharts) Income and dividend opportunities when investing in NJR I often look at utilities for reasonable income and lower volatility. Seeking Alpha gives NJR a Dividend Safety score of "B-" and growth of "B+" with a strong "A+" for consistency. These values seem reasonable, but the safety score of "B-" is one to monitor if the dividend income from utilities will be important as a core part of the portfolio. NJR expects to continue to grow the dividend by 7% to 9% (Source: Q3 earnings presentation). Whether this is achievable depends, in part, on the management of the long-term debt levels. Evaluating NJR relative to peers To evaluate the valuation of NJR relative to peers and to get a sense of the income and value opportunity here, I've selected other comparable peers in gas utilities, with a fairly comparable set of companies: Chesapeake Utilities (CPK) New Fortress Energy (NFE) NiSource Inc (NI) Northwest Natural Holding Company (NWN) ONE Gas, Inc. (OGS) RGC Resources, Inc. (RGCO) Southwest Gas Holdings (SWX) Spire Inc. (SR) UGI Corp. (UGI) From this list, how does NJR stack up against the peers in terms of valuation? In general, NJR remains reasonably valued and appears to have been less affected, perhaps, by the recent market sell-offs (Table 1). The EV/Sales (trailing 12 months) puts it below the middle of the pack; the P/S and P/E ratios are slightly below the averages as well. The EV/EBITDA remains slightly elevated and NJR is one of the more richly valued firms amongst its peers on this metric. Table 1. NJR relative to peers in terms of valuation metrics. Ticker EV / Sales ('TTM') EV / EBITDA P/S P/E RGCO 3.9 -22.3 2.2 - SWX 2.4 13.8 1 30.5 OGS 3.6 15.2 1.7 18.4 NJR 2.6 14.4 1.4 17.5 NWN 3.1 11 1.5 18.6 SR 3.5 12.1 1.5 16.5 NFE 6.7 35.9 4.6 43.2 NI 4.1 11.2 2.1 17 CPK 4.5 13 3.3 23.5 UGI 1.4 4.9 0.7 5.2 Summary 3.6 10.9 1.6 21.5 Source: Author, with data from Stock Rover Is it a good option? The dividend yield is marginally over the peers with the five-year DGR being about average for the group (Table 2). The Piotroski F-Score is one I often rely on to get a quick assessment of how the firm is doing. The score of 6 is on average and a good score, providing some assurances, particularly coupled with the ROIC values of 6.2%, above the average for the peers. Table 2. NJR relative to peers in terms of dividend and ROIC Ticker Div. Yield Div. 5Y Avg (%) Piotroski F Score ROIC RGCO 3.7% 6.1% 4 -6.7% SWX 3.5% 4.6% 3 3.3% OGS 3.4% 8.1% 6 4.1% NJR 3.7% 5.9% 6 6.2% NWN 4.3% 0.5% 5 5.0% SR 4.3% 5.5% 6 4.7% NFE 0.9% - 7 6.0% NI 3.6% 6.1% 6 5.8% CPK 1.8% 10.5% 6 7.0% UGI 4.4% 7.6% 6 13.2% Summary 3.4% 6.1% 6 4.9% Source: Author, with data from Stock Rover Valuation of New Jersey Resources and my thoughts on the investment opportunity To assess investment opportunities and the impact of the present valuation, I frequently use FAST Graphs as it brings in analysts' estimates of earnings allowing future projects of returns. We can use a target P/E multiple to assess likely returns if prices achieve the required level for the multiple. The estimated price based on the projected earnings then enables us to evaluate the rate of return. For this approach to be useful, we need reasonable P/E multiples and analysts' estimates. To assess the likelihood of analysts' estimates being accurate, we can turn to the FAST Graphs' analyst scorecard which shows that the analysts' two-year forward estimate (with a 20% margin for error) is a hit 75% of the time, a beat 25% of the time, with no misses. The one-year forward estimate is a beat 23% of the time, a hit 77% of the time, with no misses. This level of accuracy from analysts shows the stability of the company and the effectiveness with which the earnings can be estimated. Further, we can examine the lower panel in Figure 3 to get a sense of how the consensus estimate has changed over the prior six months. The stability in these changes again provides assurance of the reliability of these earnings estimates, coupled with the historic proportion of times that NJR has beat estimates, giving us a sense that the estimates are going to be conservative and reasonable. We can use the FAST Graphs forecasting calculator to assess the likely future returns (Figure 3). If we take the September 2024 as the target, and consider the valuation assessments provided earlier, we can select a reasonable P/E multiple we might expect in 2024. Given that NJR is, in my mind, a well-run utility, but the market has been volatile and NJR has some challenges with debt, I've opted to use what I think is a conservative 15x P/E as a target for 2024. The 'normalized' P/E provided by FAST Graphs of 19.11x, as achieved over the last five years, appears too high in the present environment. A 15x would, therefore, be a solid and reasonable multiple for this utility. At the 15x multiple, we might expect relatively low levels of price appreciation and most of the gain coming through dividends. The FAST Graphs forecasting calculator (Figure 3) suggests a 9.82% total rate of return until the end of September 2024 or a total annualized RoR of 4.79%. This is going to be largely driven by the expectation of 9.35% improvement in the earnings through to the end of September 2024. Figure 3. Analysts' estimates and a 15x P/E used to calculate a target price and the rate of return for an investment in New Jersey Resources (FAST Graphs) As a check, Finbox.io reports eight analysts following New Jersey Resources with an average target of $46.63 and a range from $41 (marginally above the present price) through to $56. Given the consistently optimistic nature of the analysts' targets and taking the lower end of the range as a reasonable target, it suggests that the present price has some upside potential but is more or less reasonably priced.

Sep 27
New Jersey Resources (NYSE:NJR) Takes On Some Risk With Its Use Of Debt

New Jersey Resources (NYSE:NJR) Takes On Some Risk With Its Use Of Debt

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility...

Sep 15
New Jersey Resources (NYSE:NJR) Has Announced A Dividend Of $0.3625

New Jersey Resources (NYSE:NJR) Has Announced A Dividend Of $0.3625

New Jersey Resources Corporation ( NYSE:NJR ) has announced that it will pay a dividend of $0.3625 per share on the 3rd...

Sep 14

New Jersey Resources raises quarterly dividend by 7.6%

New Jersey Resources (NYSE:NJR) declared $0.39/share quarterly dividend, 7.6% increase from prior dividend of $0.36. Forward yield 3.49% Payable Oct. 3; for shareholders of record Sept. 26; ex-div Sept. 23. See NJR Dividend Scorecard, Yield Chart, & Dividend Growth.

Sep 13
Here's What To Make Of New Jersey Resources' (NYSE:NJR) Decelerating Rates Of Return

Here's What To Make Of New Jersey Resources' (NYSE:NJR) Decelerating Rates Of Return

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an...

Shareholder Returns

NJRUS Gas UtilitiesUS Market
7D-9.5%-7.2%-2.5%
1Y8.7%-2.1%-23.2%

Return vs Industry: NJR exceeded the US Gas Utilities industry which returned 1.6% over the past year.

Return vs Market: NJR exceeded the US Market which returned -21.5% over the past year.

Price Volatility

Is NJR's price volatile compared to industry and market?
NJR volatility
NJR Average Weekly Movement3.8%
Gas Utilities Industry Average Movement3.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: NJR is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: NJR's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19811,251Steve Westhovenhttps://www.njresources.com

New Jersey Resources Corporation, an energy services holding company, provides regulated gas distribution, and retail and wholesale energy services. The company operates through four segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, and Storage and Transportation. The Natural Gas Distribution segment offers regulated natural gas utility services to approximately 564,000 residential and commercial customers throughout Burlington, Middlesex, Monmouth, Morris, Ocean, and Sussex counties in New Jersey; provides capacity and storage management services; and participates in the off-system sales and capacity release markets.

New Jersey Resources Corporation Fundamentals Summary

How do New Jersey Resources's earnings and revenue compare to its market cap?
NJR fundamental statistics
Market CapUS$3.72b
Earnings (TTM)US$219.27m
Revenue (TTM)US$2.67b

17.0x

P/E Ratio

1.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
NJR income statement (TTM)
RevenueUS$2.67b
Cost of RevenueUS$2.15b
Gross ProfitUS$523.37m
Other ExpensesUS$304.10m
EarningsUS$219.27m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)2.28
Gross Margin19.58%
Net Profit Margin8.20%
Debt/Equity Ratio163.3%

How did NJR perform over the long term?

See historical performance and comparison

Dividends

4.0%

Current Dividend Yield

64%

Payout Ratio