8-K: New Jersey Resources Reports Mixed Q1 Results but Raises Full-Year Earnings Guidance

New Jersey Resources reported a decrease in first-quarter earnings compared to the previous year, but increased its full-year net financial earnings per share guidance due to strong performance in January.

Summary

• New Jersey Resources (NJR) announced its fiscal year 2024 first-quarter results, showing a consolidated net income of $89.4 million, down from $115.9 million in the same quarter of fiscal 2023.
• Net financial earnings (NFE), a non-GAAP measure, were $72.4 million, or $0.74 per share, compared to $110.3 million, or $1.14 per share, in the prior year's first quarter.
• The decrease in NFE is primarily attributed to unusually high earnings at Energy Services in the prior year due to Winter Storm Elliott.
• NJR has increased its fiscal 2024 net financial earnings per share (NFEPS) guidance range to $2.85 to $3.00, up from $2.70 to $2.85, due to strong performance from Energy Services in January 2024.
• The company maintains its long-term projected NFEPS growth rate of 7 to 9 percent.
• New Jersey Natural Gas (NJNG) filed a rate case seeking a $222.6 million increase in delivery rates and a proposed $482.4 million investment in energy-efficiency programs.
• NJNG added 2,129 new customers during the quarter, expected to contribute approximately $1.9 million in annualized gross margin.
• Clean Energy Ventures (CEV) reported a net financial earnings of $10.5 million, compared to a loss of $(3.6) million in the same period last year, driven by higher SREC and TREC revenue.
• Energy Services reported a NFE of $7.8 million, down from $52.5 million in the prior year due to the impact of Winter Storm Elliott in the prior year.
• Capital expenditures for the quarter were $118.1 million, down from $137.0 million in the same period last year, primarily due to lower solar capital expenditures.
• Cash flows from operations were $46.4 million, compared to cash flows used in operations of $(88.9) million in the same period last year, due to lower gas prices.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the increased earnings guidance and strong performance in some segments, despite a decrease in overall earnings compared to the previous year. The company's strategic investments and long-term growth targets are also positive indicators.

Positives

• NJR increased its fiscal 2024 NFEPS guidance range by $0.15, indicating improved financial performance expectations.
• The company maintains a long-term projected NFEPS growth rate of 7 to 9 percent.
• Clean Energy Ventures (CEV) showed a significant improvement in net financial earnings, moving from a loss to a profit.
• NJNG added 2,129 new customers, which are expected to contribute approximately $1.9 million in annualized gross margin.
• Cash flows from operations improved significantly due to lower gas prices.

Negatives

• Consolidated net income decreased to $89.4 million from $115.9 million in the same quarter of the previous year.
• Net financial earnings (NFE) decreased to $72.4 million from $110.3 million in the same quarter of the previous year.
• Energy Services experienced a significant decrease in NFE, from $52.5 million to $7.8 million, due to the impact of Winter Storm Elliott in the prior year.
• Basic Gas Supply Service (BGSS) incentive programs contributed $5.4 million to utility gross margin, compared with $8.7 million during the same period of fiscal 2023, due to lower natural gas prices and a lack of weather volatility.

Risks

• The company's performance is subject to market conditions and the behavior of other market participants.
• There could be differences between reported GAAP earnings and NFE due to the positions of energy-related derivatives.
• The outcome and timing of the base rate case with the BPU are uncertain.
• The company's performance is subject to weather volatility and natural gas price fluctuations.
• The company's future performance is subject to regulatory and legal expectations.

Future Outlook

NJR expects Energy Services to represent a higher percentage of NFEPS in fiscal 2024 due to contributions from Asset Management Agreements and strong performance in January. The company maintains its long-term projected NFEPS growth rate of 7 to 9 percent. The new SAVEGREEN program cycle is expected to begin January 1, 2025 and run through June 30, 2027, if approved by the BPU.

Management Comments

• Steve Westhoven, President and CEO of New Jersey Resources, stated, 'Our results for the first quarter were consistent with our expectations.'
• Steve Westhoven also stated, 'Additionally, our performance in the beginning of our fiscal second quarter has exceeded our original projections, as Energy Services benefited from natural gas price volatility. As a result, we are raising our fiscal 2024 NFEPS guidance range by $0.15 to $2.85 to $3.00.'

Industry Context

The results reflect the ongoing volatility in the energy sector, particularly in natural gas prices, and the increasing focus on renewable energy and energy efficiency programs. The company's performance is influenced by weather patterns, regulatory decisions, and market conditions. The rate case filing and the proposed SAVEGREEN program are significant developments for the company's future operations and financial performance.

Comparison to Industry Standards

• NJR's long-term NFEPS growth target of 7-9% is at the higher end of its peer group, which includes companies like ATO, AVA, BKH, CMS, CNP, CPK, MDU, NFG, NI, NWE, NWN, OGS, SWX, UGI, and UTL.
• The company's investment in solar projects, with approximately 473 MW of capacity, positions it as a significant player in the renewable energy sector, particularly in New Jersey.
• NJR's SAVEGREEN program, with a proposed $482.4 million investment, is a substantial commitment to energy efficiency, aligning with broader industry trends towards decarbonization.
• The company's diversified portfolio, including natural gas distribution, clean energy ventures, storage and transportation, and energy services, is a common strategy among large energy companies to mitigate risk and capitalize on different market opportunities.
• The company's focus on a strong credit rating and a well-positioned debt repayment schedule is consistent with industry best practices for financial stability.

Stakeholder Impact

• Shareholders will benefit from the increased earnings guidance and the company's commitment to long-term growth and dividend increases.
• Customers will benefit from the proposed energy-efficiency programs and the company's commitment to providing safe and reliable natural gas and clean energy services.
• Employees will continue to be part of a company committed to sustainability and community engagement.
• The company's suppliers and creditors will benefit from the company's strong financial profile and commitment to maintaining an investment-grade credit rating.

Next Steps

• The company will continue to execute its strategic plan to drive continued, organic growth.
• The company will await the outcome of the rate case filed with the New Jersey Board of Public Utilities.
• The company will seek approval for the proposed next generation of SAVEGREEN energy-efficiency offerings.
• The company will continue to develop its pipeline of solar investment opportunities.
• The company will continue to manage its diversified portfolio of assets.

Key Dates

Keywords

Net Financial Earnings, NFEPS, New Jersey Resources, Energy Services, Clean Energy Ventures, New Jersey Natural Gas, Rate Case, SAVEGREEN, Solar Energy, Natural Gas