New Jersey Resources Earnings: Well-Positioned To Benefit From Clean Energy Policies, Regulations

We are reaffirming our $45 fair value estimate for New Jersey Resources NJR after the firm reported earning $0.10 per share on an adjusted basis during the third quarter of the 2023 fiscal year, up from a $0.04 loss in the same quarter last year. We reaffirm our narrow moat rating.

Third-quarter earnings are typically a small share of full-year earnings and not necessarily representative of long-term earnings trends. Year-to-date earnings are up 20% to $2.40 per share from last year, primarily because of large outperformance during the first quarter. Earlier this year, we raised our 2023 full-year earnings estimate in line with management’s $2.62-$2.72 EPS guidance range.

NJR is on track to exceed management’s initial EPS guidance range and 7%-9% annual growth rate target for the third consecutive year, although we think that will be difficult to continue next year if natural gas markets stabilize. We think maintaining growth at the high end of that range—which would be among the highest in the utilities sector—is ambitious but achievable if NJR’s nonutility businesses grow faster than we expect.

NJR’s infrastructure investment plan remains on track. We continue to expect at least $1.2 billion of capital investment at NJR’s core New Jersey utility during the next three years, with potential upside in 2025 and beyond depending on the development of state clean energy policies.

We expect NJR’s New Jersey utility will request new rates during the 2024 fiscal year and reach a constructive outcome by fiscal-year 2025. Customer growth continues to support earnings growth.

The clean energy ventures business continues to grow in line with our expectations. Its contracted pipeline of projects climbed to 757 megawatts, up from 660 MW early this year and on track to meet our 20% annualized growth forecast for at least the next four years.