National Fuel Gas (NFG) to Gain From Expanding Operations
National Fuel Gas Company’s NFG high-quality assets, systematic investments and expanding upstream and midstream operations are expected to boost its earnings.
However, this Zacks Rank #3 (Hold) stock faces risks related to compliance of regulations, dependence on subsidiaries and high operating costs.
Tailwinds
National Fuel Gas is focused on organic growth. It has invested $727.7 million in the first nine months of fiscal 2023 and aims to invest $865-$975 million in fiscal 2024. Since 2010, NFG has invested $2.4 billion in midstream operations to expand and modernize its pipeline infrastructure for gaining access to Appalachian production. Further, it continues to replace and modernize the existing pipelines. In fiscal 2018-2022, the company replaced 781 miles of utility main pipelines.
National Fuel Gas’ acquisition of Royal Dutch Shell’s upstream and midstream assets in Pennsylvania added 684 billion cubic feet of natural gas reserves. The company’s increased scale and contiguous operations are expected to reduce the per-cash-unit costs and boost margins.
Expanding operations enables NFG to generate a stable cash flow and reward shareholders. The company has been paying dividends for the past 121 years. Its current dividend yield is 3.56%, higher than the Zacks S&P 500 Composite's average of 1.42%. In June 2023, management approved another dividend hike, increasing the quarterly rate to 49.5 cents from 47.5 cents.
Headwinds
National Fuel Gas’ business operations are affected by strong natural gas market competition, stringent government regulations and fluctuating weather conditions. The company’s huge dependence on the performance of its subsidiaries can adversely impact its capacity to meet financial obligations.
Stocks to Consider
Some better-ranked utilities in the same industry are Atmos Energy Corp. ATO, MDU Resources Group Inc. MDU and ONE Gas Inc. OGS, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atmos Energy’s long-term (three to five-year) earnings growth rate is 7.5%. ATO delivered an average earnings surprise of 2.40% in the last four quarters.
MDU Resources’ long-term earnings growth rate is 5.8%. MDU delivered an average earnings surprise of 14.16% in the last four quarters.
ONE Gas’ long-term earnings growth rate is 5%. OGS delivered an average earnings surprise of 1.90% in the last four quarters.
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Atmos Energy Corporation (ATO) : Free Stock Analysis Report
MDU Resources Group, Inc. (MDU) : Free Stock Analysis Report
National Fuel Gas Company (NFG) : Free Stock Analysis Report
ONE Gas, Inc. (OGS) : Free Stock Analysis Report
