On Friday, Mizuho (NYSE:MFG) Securities updated its evaluation of New Jersey Resources (NYSE:NYSE:NJR) shares, a $4.59 billion utility company, increasing the company’s price target from $47.00 to $50.00. The firm has decided to maintain its neutral stance on the stock.
The adjustment follows the favorable outcome of New Jersey Natural Gas’s (NJNG) rate case, which was recently settled and surpassed expectations. According to InvestingPro data, NJR has demonstrated remarkable stability with a low beta of 0.64 and maintains a solid 3.91% dividend yield.
The resolution of the rate case is seen to enhance the predictability of NJR’s potential to achieve approximately 7-9% net financial earnings per share (NFEPS) growth over the medium term. Moreover, it solidifies the notion that growth in NJR’s non-regulated businesses will not undermine the earnings of its utility operations.
This development is viewed as a positive aspect of NJR’s financial narrative. InvestingPro analysis reveals that NJR has raised its dividend for 29 consecutive years, demonstrating consistent shareholder returns despite market fluctuations.
The analysis also suggests that, despite the positive rate case outcome, market attention may soon shift to NJNG’s rate base growth prospects. This shift in focus is anticipated as the utility’s capital expenditures in the near term are expected to align with those of fiscal years 2023 and 2024. NJNG’s infrastructure is also considered more modern compared to its local distribution company (LDC) counterparts.
Mizuho’s outlook indicates that NJR’s long-standing guidance for 7-9% long-term NFEPS growth could lean towards the higher end of that range in the medium term. The growth in non-utility earnings, though deemed lower quality, has indirectly supported the valuation of NJR’s more lucrative business segments. These segments might warrant a more comprehensive appraisal.
Looking ahead, the firm anticipates that the focus will return to NJR’s ’Clean Energy Ventures’ (CEV) segment, especially considering recent project delays and the potential policy changes under the incoming administration.
Based on InvestingPro’s comprehensive analysis, which includes over 30 key metrics and financial indicators, the stock appears slightly overvalued relative to its Fair Value estimate. The revised price target reflects these various factors, yet Mizuho reiterates its neutral position on NJR shares.
In other recent news, New Jersey Resources (NJR) has reported surpassing its Net Financial Earnings Per Share (NFEPS) guidance for the fourth consecutive year, ending fiscal year 2024 with an NFEPS of $2.95, an increase from $2.70 in the previous year. The company has set a growth target of 7-9% for NFEPS and aims for a total shareholder return of 11-13%.
In a strategic move, NJR announced the divestiture of its residential solar portfolio, Sunlight Advantage, for $132.5 million, aimed at simplifying the Clean Energy Ventures (CEV) business and concentrating on the expansion of commercial solar initiatives.
Guggenheim updated its outlook on NJR, increasing the price target to $49.00 from the previous $46.00, while keeping a Neutral rating on the stock. This followed a favorable outcome from the New Jersey Board of Public Utilities (BPU) regarding the settlement of New Jersey Natural Gas’s (NJNG) rate case.
NJR’s plans for future capital expenditures range from $1.3 to $1.6 billion over the next two years, focusing on utility infrastructure and clean energy. The company’s initial guidance for fiscal year 2025 is set between $3.05 and $3.20 per share.
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