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Checking the boxes regarding fundamentals investors look for in a value stock, National Fuel Gas Company’s (NFG - Free Report) growth prospects have become more attractive as well.
The integrated energy company looks like a sound investment option amid recent market volatility and the reemergence of broader economic fears due to its diverse business operations. Keeping this scenario in mind, NFG sports a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day.
Defensive Safety Overview
Because of the essentiality of their services, utility stocks are often sought out during heightened market volatility and economic uncertainty. This case has spawned over the last week after July’s weaker-than-expected jobs report showed the US unemployment rate spiked to its highest peak since 2021 while tensions between Iran and Israel have raised global geopolitical concerns.
As an investment that can potentially safeguard against market weakness, NFG's essential business service is providing natural gas to over 2 million customers in New York and Pennsylvania. Notably, NFG’s Zacks Utility-Gas Distribution Industry is currently in the top 21% of over 250 Zacks industries.
Diverse Business Operations
Having natural gas assets located in the coveted Appalachian basin, NFG’s business operations extend to the exploration and production of oil. Plus, NFG has oil-producing assets in California with crude prices still hovering over $70 a barrel despite a recent dip in the commodity price. That said, recent geopolitical tensions in the Middle East could lead to sharp spikes in oil prices.
Image Source: Trading Economics
Increased Profitability
Benefitting from its strong business industry, earnings estimate revisions have continued to trend higher for NFG over the last two months. Even better, fiscal 2024 and FY25 EPS estimates have risen 8% and 4% in the last 30 days respectively.
NFG’s EPS is now expected to dip -1% in FY24 but is projected to rebound and climb 18% in FY25 to $6.05 per share.
Image Source: Zacks Investment Research
It’s also noteworthy that FY25 EPS projections would represent 75% growth from pre-pandemic levels with earnings at $3.45 a share in 2019.
Image Source: Zacks Investment Research
Attractive Valuation
What makes NFG’s increased probability stand out is a very reasonable P/E valuation of 11.5X forward earnings with rising EPS estimates offering support to the notion that this is cheap. To that point, NFG trades at a nice discount to its industry average of 15.2X forward earnings and well below the S&P 500’s 22.5X.
Image Source: Zacks Investment Research
Dividend King
Lofty dividends also attract investors to utility stocks as they can offer generous payouts due to the steady demand for their services. NFG is very attractive in this regard and is considered a Dividend King, increasing its payout for more than 50 years.
NFG’s 3.49% annual dividend yield impressively tops the S&P 500’s 1.3% average and edges the industry average of 3.2%. Better still, NFG’s 41% payout ratio implies there is plenty of room to increase its dividend in the future.
Image Source: Zacks Investment Research
Final Thoughts
At current levels, National Fuel Gas Company's stock is certainly enticing considering the proposition of offering defensive safety in the portfolio. The trend of positive earnings estimate revisions further suggests now is an ideal to buy stock in this Dividend King given NFG’s attractive P/E valuation.
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Bull of the Day: National Fuel Gas Company (NFG)
Checking the boxes regarding fundamentals investors look for in a value stock, National Fuel Gas Company’s (NFG - Free Report) growth prospects have become more attractive as well.
The integrated energy company looks like a sound investment option amid recent market volatility and the reemergence of broader economic fears due to its diverse business operations. Keeping this scenario in mind, NFG sports a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day.
Defensive Safety Overview
Because of the essentiality of their services, utility stocks are often sought out during heightened market volatility and economic uncertainty. This case has spawned over the last week after July’s weaker-than-expected jobs report showed the US unemployment rate spiked to its highest peak since 2021 while tensions between Iran and Israel have raised global geopolitical concerns.
As an investment that can potentially safeguard against market weakness, NFG's essential business service is providing natural gas to over 2 million customers in New York and Pennsylvania. Notably, NFG’s Zacks Utility-Gas Distribution Industry is currently in the top 21% of over 250 Zacks industries.
Diverse Business Operations
Having natural gas assets located in the coveted Appalachian basin, NFG’s business operations extend to the exploration and production of oil. Plus, NFG has oil-producing assets in California with crude prices still hovering over $70 a barrel despite a recent dip in the commodity price. That said, recent geopolitical tensions in the Middle East could lead to sharp spikes in oil prices.
Image Source: Trading Economics
Increased Profitability
Benefitting from its strong business industry, earnings estimate revisions have continued to trend higher for NFG over the last two months. Even better, fiscal 2024 and FY25 EPS estimates have risen 8% and 4% in the last 30 days respectively.
NFG’s EPS is now expected to dip -1% in FY24 but is projected to rebound and climb 18% in FY25 to $6.05 per share.
Image Source: Zacks Investment Research
It’s also noteworthy that FY25 EPS projections would represent 75% growth from pre-pandemic levels with earnings at $3.45 a share in 2019.
Image Source: Zacks Investment Research
Attractive Valuation
What makes NFG’s increased probability stand out is a very reasonable P/E valuation of 11.5X forward earnings with rising EPS estimates offering support to the notion that this is cheap. To that point, NFG trades at a nice discount to its industry average of 15.2X forward earnings and well below the S&P 500’s 22.5X.
Image Source: Zacks Investment Research
Dividend King
Lofty dividends also attract investors to utility stocks as they can offer generous payouts due to the steady demand for their services. NFG is very attractive in this regard and is considered a Dividend King, increasing its payout for more than 50 years.
NFG’s 3.49% annual dividend yield impressively tops the S&P 500’s 1.3% average and edges the industry average of 3.2%. Better still, NFG’s 41% payout ratio implies there is plenty of room to increase its dividend in the future.
Image Source: Zacks Investment Research
Final Thoughts
At current levels, National Fuel Gas Company's stock is certainly enticing considering the proposition of offering defensive safety in the portfolio. The trend of positive earnings estimate revisions further suggests now is an ideal to buy stock in this Dividend King given NFG’s attractive P/E valuation.