New Jersey Resources Earnings: Performance Still On Track To Hit High End of Expectations

We are reaffirming our $43 fair value estimate for New Jersey Resources NJR after the firm reported earning $1.16 per share on an adjusted basis during the second quarter of the 2023 fiscal year, down from $1.36 in the same quarter last year. We reaffirm our narrow moat and stable moat trend ratings.

First-half earnings are up nearly 13% to $2.30 per share from last year, primarily due to large outperformance during the first quarter. Earlier this year we raised our 2023 full-year earnings estimate in line with management’s revised $2.62-$2.72 EPS guidance range.

Management reaffirmed its EPS guidance range and 7%-9% annual long-term earnings growth target, both in line with our outlook. NJR is on track to exceed management’s initial EPS guidance range and growth rate target for the third consecutive year.

At NJR’s core New Jersey utility, higher operating costs and higher depreciation related to growth capital investments were a drag on earnings in the quarter, partially offset by benefits from customer growth. These will continue to be near-term earnings drivers until regulators approve another round of customer rate adjustments, likely in late 2024. The utility’s usage-decoupled rates saved it from a potentially large weather-related impact on earnings given the warm winter.

Energy services’ earnings fell nearly $9 million, or 24%, during the second quarter primarily due to lower gas usage during an unusually warm winter but remain up $26 million, or 55%, in the first half. Earnings also were down in the quarter at NJR’s storage and transportation segment but are up year over year through the first half. We still expect stable earnings from that segment over the full year.

The clean energy ventures business also is growing in line with our expectations. Its contracted pipeline of projects climbed to 740 megawatts from 660 MW last quarter, on track to meet our 20% annualized growth forecast for at least the next five years.