New Jersey Resources Offering A Favorable Entry Point, Says Argus
Argus expects New Jersey Resources Corp (NYSE: NJR) shares to outperform in the gas distribution sector following the reiteration of its operating EPS forecast for the fiscal year 2016. Therefore, the stock offers a good entry point at current levels to realize potential upside rewards of about 27 percent.
Analyst Gary Hovis has not only maintained his Buy rating but also reiterated target price of $42 on the company’s stock. In the second quarter, the company’s EPS missed estimates by a penny, although its EPS exceeded or met estimations in the preceding three quarters.
“We view New Jersey Resources as a stable, regulated utility that should provide investors with growing dividend income and the potential for moderate share price appreciation. We expect annual earnings growth at NJR of 4–5 percent, and total returns to shareholders, including the dividend, of 5–6 percent annually,” the analyst told clients in a research note.
Aside from that, the brokerage expects low wellhead natural gas prices to lift demand from both commercial and industrial sectors. Its regulated gas distribution business is supported by a possible high-return non-regulated business thus ensuring advantages in the ongoing shift to gas heating.
Hovis is confident that New Jersey Resources will maintain its investment on infrastructure projects to ensure higher returns in the upcoming period. The brokerage sees more customer addition and fresh projects to add strength to its results.
At time of writing, New Jersey Resources was up 0.97 percent on the day at $33.30.
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