New Jersey Resources Has Growth at Gas Utility and Clean Energy Businesses

Strategist

Travis Miller

New Jersey Resources, or NJR, is one of the few U.S. utilities that has committed to maintaining and growing a diverse set of businesses from rate-regulated natural gas distribution to renewable energy investments. Management's investments in nonregulated energy businesses such as solar and natural gas midstream are paying off nicely for investors.

Constructive regulation and customer growth in New Jersey have produced steady earnings growth for NJR's regulated gas distribution business. But that legacy business is set to contribute only about 60% of earnings in the coming years if NJR's midstream and renewable energy businesses continue to grow rapidly.

We forecast 8% annual average consolidated earnings growth, in line with management's 7%-9% target. NJR has exceeded that growth recently due to three consecutive years of unusually large weather-related benefits.

We expect NJR to invest $700 million in new solar projects during the next three years Other growth opportunities could include hydrogen and renewable natural gas. These projects support clean energy goals in New Jersey and other states.

New Jersey's historically constructive regulation allows NJR to pay out a higher share of earnings and grow the dividend in line with the utility's earnings growth. Regulators approved a settlement in November 2021 that maintains its 9.6% allowed return on equity from NJR's 2016 and 2019 rate cases. NJR plans to request another rate increase soon.

Although NJR's allowed ROE is lower than other utilities, the utility enjoys other rate mechanisms for its safety and upgrade investments that support steady cash flow. We expect NJR's regulated distribution utility can grow earnings 6% annually based on 1% customer growth and about $450 million of annual infrastructure investments.

NJR's $367.5 million acquisition of the Leaf River (Mississippi) Energy Center in late 2019 paid off big in early 2021 when extreme cold weather allowed NJR to profit from its gas in storage. New Jersey Resources' energy services business has performed exceptionally well when gas markets turn volatile during extreme weather events, but we don't think that business has an economic moat.

Business Strategy & Outlook

NJR owns a difficult-to-replicate network of natural gas distribution and midstream assets, providing an essential energy source to customers. In exchange for a service territory monopoly, state regulators set rates for NJR's distribution utility at levels that aim to keep customer costs low while providing adequate returns for capital providers. This implicit contract between regulators and the utility should, in the long run, allow NJR to earn a small spread over its cost of capital.

NJR's rate-setting mechanisms and overall regulatory environment are mostly constructive, consistently leading to returns on invested capital modestly above the weighted average cost of capital. We have strong confidence that NJR's ROICs will remain at a healthy spread over WACC for the foreseeable future, leading us to assign the company a narrow moat. 

As with all regulated utilities, we think regulatory caps on revenue and returns preclude NJR from establishing a wide economic moat.

NJR derives one third of its earnings and cash flows from businesses that have few competitive advantages, particularly its energy services business and renewable energy investments. These businesses would have to grow significantly relative to the utility for us to consider re-evaluating NJR's economic moat.

We consider its midstream business, which contributes about 10% of earnings, to have efficient-scale competitive advantages consistent with a narrow economic moat.

Narrow

Economic Moat

New Jersey Resources

New Jersey Resources Corp. is a holding company. The firm provides safe and reliable natural gas and clean energy services, including transportation, distribution, asset management and home services. It operates through the following segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, Storage and Transportation, and Home Services and Other. The Natural Gas Distribution segment regulates natural gas services, off-system sales, capacity, and storage management operations. The Clean Energy Ventures segment consists of capital investments in clean energy projects. The Energy Services segment consists of unregulated wholesale and retail energy operations, as well as energy management services. The Storage and Transportation segment consists of investments in the natural gas storage and transportation market, such as natural gas storage and transportation facilities. The company was founded in 1981 and is headquartered in Wall, NJ.

Earnings data Q1 2024

Revenue

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

New Jersey Resources Corp. is a holding company, which engages in the provision of regulated natural gas distribution services, transmission and storage services, and operates certain unregulated businesses. It operates through the following segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, Storage and Transportation, and Home Services and Other. The Natural Gas Distribution segment regulates natural gas services, off-system sales, capacity, and storage management operations. The Clean Energy Ventures segment consists of capital investments in clean energy projects. The Energy Services segment refers to the unregulated wholesale and retail energy operations, as well as energy management services. The Storage and Transportation segment is involved in the investments in the natural gas storage and transportation market, such as natural gas storage and transportation facilities. The company was founded in 1981 and is headquartered in Wall, NJ.

New Jersey Resources (NJR) rising earnings estimates, strong investment plans and stable cash flows make a strong case for investments in the gas distribution space.

4 Reasons to Add New Jersey Resources (NJR) to Your Portfolio

New Jersey Resources Corporation (NJR) CEO Steve Westhoven on Q1 2022 Results - Earnings Call Transcript

WALL, N.J.--(BUSINESS WIRE)--Today, New Jersey Resources Corporation (NYSE: NJR) reported results for the first-quarter of fiscal 2022. Highlights include: Consolidated net income of $111.3 million for the three months ended December 31, 2021, compared with $81.0 million for the same period last year Consolidated net financial earnings (NFE), a non-GAAP financial measure, of $65.8 million, or $0.69 per share for the three months ended December 31, 2021, compared with NFE of $44.7 million, or $0

New Jersey Resources Reports First-Quarter Fiscal 2022 Results

New Jersey Resources is one of the largest natural gas utilities in New Jersey. Natural gas is unlikely to be replaced by electricity for heating anytime soon so the company does have staying power.

New Jersey Resources: Solid Natural Gas Utility With Inflation Protection

Atmos Energy

National Fuel Gas

Sempra Energy

The near-term prospects of the Zacks Gas Distribution industry look promising. The gradual improvement in production and demand for natural gas will drive the performance of SRE, ATO, NFG and NJR.

4 Stocks to Watch in a Prospering Gas Distribution Industry

WALL, N.J.--(BUSINESS WIRE)--New Jersey Resources Highlights Sustainability Agenda

New Jersey Resources Highlights Sustainability Agenda at Annual Shareowners Meeting

WALL, N.J.--(BUSINESS WIRE)--New Jersey Resources (NYSE: NJR), today hosted its 69th Annual Shareowners Meeting. Due to the ongoing COVID-19 pandemic, the meeting was held virtually. By an overwhelming majority, shareowners re-elected Gregory E. Aliff, Robert B. Evans and Thomas C. O'Connor to the board of directors for three-year terms that will expire in 2025. “We have an exceptional board of directors whose expertise continues to serve our customers, company and shareowners well,” said Steve

New Jersey Resources Hosts 69th Annual Meeting; Shareowners Elect Three Directors

WALL, N.J.--(BUSINESS WIRE)--New Jersey Resources (NYSE: NJR) schedules fiscal 2022 first-quarter earnings call for Thursday, February 3, 2022 at 10 a.m. ET

New Jersey Resources Schedules Fiscal 2022 First-Quarter Earnings Call

WALL, N.J.--(BUSINESS WIRE)--New Jersey Resources (NYSE: NJR) today announced a series of executive and senior leadership promotions that position the company to execute on its growth strategy, sustainability goals and investment priorities. Unless otherwise noted, changes will be effective January 1, 2022 and include: Patrick Migliaccio was named Senior Vice President and Chief Operating Officer of New Jersey Natural Gas (NJNG). Roberto Bel was promoted to Senior Vice President and Chief Finan

New Jersey Resources Announces Executive Promotions and Key Leadership Changes

Crestwood Equity Partners

These lesser-known companies offer an intriguing blend of income and upside opportunity.

3 Under-the-Radar Stocks to Buy in December

WALL, N.J.--(BUSINESS WIRE)--Due to a significant increase in wholesale natural gas prices, today New Jersey Natural Gas (NJNG) filed a notice with the New Jersey Board of Public Utilities (BPU) for a 5% increase related to Basic Gas Supply Service (BGSS) for residential and certain small commercial customers effective December 1, 2021. Since May 2021, wholesale natural gas prices on the NYMEX – a benchmark index for gas commodity pricing – have increased by nearly 80%. The change to the BGSS i

Steep Rise in Natural Gas Prices Prompts New Jersey Natural Gas to Implement a 5% Increase to Cover Wholesale Commodity Costs

New Jersey Resources Corporation (NJR) CEO Steve Westhoven on Q4 2021 Results - Earnings Call Transcript

New Jersey Resources (NJR) delivered earnings and revenue surprises of -12.50% and 39.94%, respectively, for the quarter ended September 2021. Do the numbers hold clues to what lies ahead for the stock?

New Jersey Resources (NJR) Q4 Earnings Lag Estimates

WALL, N.J.--(BUSINESS WIRE)--Today, New Jersey Resources Corporation (NYSE: NJR) reported results for the fourth-quarter and fiscal 2021. Highlights include: Consolidated net income of $117.9 million for fiscal 2021 compared with $163.0 million in fiscal 2020 Consolidated net financial earnings (NFE), a non-GAAP financial measure of $207.7 million for fiscal 2021, or $2.16 per share, compared with NFE of $165.3 million, or $1.74 per share, in fiscal 2020 Affirmed fiscal 2022 net financial earni

New Jersey Resources Reports Fourth-Quarter and Fiscal 2021 Results

WALL, N.J.--(BUSINESS WIRE)--New Jersey Natural Gas (NJNG) today received approval from the New Jersey Board of Public Utilities (BPU) on the settlement of its base rate case and conclusion of its Safety Acceleration and Facility Enhancement (SAFE II) and New Jersey Reinvestment in System Enhancement (NJ RISE) programs, resulting in a $79.269 million increase to its base rates. NJNG requested the increase to recover costs associated with the responsible operation of its business, system enhance

New Jersey Board of Public Utilities Approves New Rates for New Jersey Natural Gas

Automatic Data Processing

Assurant

Atlantica Sustainable Infrastructure

Cabot

D.R. Horton

Lancaster Colony

Leggett & Platt

MDU Resources Group

Roper Technologies

Service Corp

SPDR S&P 500 ETF Trust

Xylem

This weekly article series covers dividend changes. A summary table provides relevant data and key statistics of dividend increases.

Dividend Increases: November 6-12, 2021

New Jersey Resources is an excellent high-yield dividend champion… though one you've probably never heard of. NJR traces its roots back to 1952… and has been paying dividends the entire time.

New Jersey Resources Is A Great Dividend Aristocrat That Can Beat Inflation

WALL, N.J.--(BUSINESS WIRE)--New Jersey Resources (NYSE: NJR) invites investors, customers, members of the financial community and other interested parties to listen to a live webcast of its fiscal 2021 year-end earnings results on Thursday, November 18, 2021 at 10 a.m. ET. President and Chief Executive Officer Steve Westhoven and Chief Financial Officer Pat Migliaccio will present an overview of NJR's financial and operational performance for fiscal 2021. A few minutes prior to the webcast, go

New Jersey Resources Schedules Fiscal 2021 Year-End Earnings Call

The yield on this utility stock has spiked in recent months, and now the stock is starting to look pretty attractive to dividend investors.

This Reliable Dividend Utility Looks Cheap

Franklin Resources

Brookfield Infrastructure

Bristol-Myers

Chevron

Enterprise Products Partners

Flowers Foods

Gaming and Leisure Properties

Huntington Bancshares

Kinder Morgan

LyondellBasell Industries

Altria

Medical Properties Trust

Merck

Newmont Mining

National Retail Properties

ONE Gas

Sturm, Ruger & Company

Retail Opportunity Investments

Unum

Vale S.A.

Valero Energy

Williams

Exxon Mobil

May to August, 2021, Kiplinger-Today listed eight sets of stocks sorted as: best-buys for 2021, infrastructure-plays, value, growth, small-cap, high-yield, housing-bets, and cash-flow-gushers. Those eight "exceptional-dividend" articles revealed 86 equities,.

14 Exceptional Dividend Buys For October

Atrion

ChoiceOne Financial Services Inc

Capital Southwest

First Republic

Verizon

This article series covers dividend changes. A table with relevant data and key statistics of dividend increases is provided.

Dividend Increases: August 28-September 10, 2021

WALL, N.J.--(BUSINESS WIRE)--New Jersey Resources (NYSE: NJR) today announced Interim General Counsel and Corporate Secretary Richard Reich has been promoted to Senior Vice President and General Counsel. In this position, Mr. Reich is responsible for leading NJR's legal department, developing and directing the corporate legal function and overseeing corporate compliance. He will also continue to serve in the Corporate Secretary role until a replacement is selected. “Rich is an exceptional corpo

New Jersey Resources Appoints Richard Reich Senior Vice President and General Counsel

WALL, N.J.--(BUSINESS WIRE)--The board of directors of New Jersey Resources (NYSE: NJR) unanimously approved a 9 percent increase in the quarterly dividend rate to $.3625 per share from $.3325 per share. The new quarterly rate will be effective with the dividend payable October 1, 2021 to shareowners of record on September 20, 2021. This dividend replaces the previously announced dividend of $.3325 per share approved on July 14, 2021 for shareowners of record on September 20, 2021. The new annu

New Jersey Resources Board of Directors Increases Dividend by 9 Percent

Let's see if New Jersey Resources (NJR) stock is a good choice for value-oriented investors right now from multiple angles.

Should Value Investors Pick New Jersey Resources (NJR) Stock?

M.D.C. Holdings

Otter Tail

Small-cap stocks aren't generally seen as income-building investments, but the names on this list offer hefty payouts for shareholders.

6 Small-Cap Dividend Stocks to Buy Now

News for New Jersey Resources Stock (NJR)