Morningstar | NJR's Growth Projects On Track to Boost 2019-20 Earnings
We are reaffirming our $33 fair value estimate and narrow moat and stable moat trend ratings after New Jersey Resources reported net financial earnings per share of $0.61 in the first quarter of fiscal 2019, down from $1.56 last year. Management reaffirmed its $1.95-$2.05 EPS guidance for 2019, in line with our estimate.We anticipated the drop in earnings due to the exceptional outperformance of NJR's energy services segment in the first quarter last year. Natural gas price volatility, which typically is a positive for energy services, returned to historically normal levels in the quarter. Thus, we think this year's first-quarter earnings at energy services represents a steady-state level. However, investors should be prepared for this segment to continue to be a volatile earnings contributor.
NJR's regulated utility still represents about half of earnings, and we don't expect that to change in the near future. With $1.1 billion of planned capital investment, we think the distribution utility will keep pace with NJR's midstream segment when it starts collecting earnings from the Adelphia Gateway and Penn East projects in 2020-beyond.
We don't expect any material benefit in the fiscal second quarter as a result of the recent exceptionally cold weather across the Eastern U.S. The short duration of this year's extreme cold limits the upside NJR has realized during past winters when exceptionally cold weather lasted longer.
We continue to expect NJR can grow its dividend 7% annually on average at least the next three years.
New Jersey Resources is an energy services holding company whose principal business is the distribution of natural gas through a regulated utility, providing other retail and wholesale energy services to customers and investing in clean energy projects and midstream assets. The company's segments are: Natural Gas Distribution, which consists of regulated natural gas services, off-system sales, capacity and storage management operations; Clean Energy Ventures, which consists of capital investments in clean energy projects; Energy Services, which consists of unregulated wholesale and retail energy operations; and Midstream, which consists of investments in the midstream natural gas market.
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