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New Jersey Resources reported adjusted earnings per share of $3.48 through its first three fiscal quarters, up from $3.13 in the same year-ago period. Results are on track to meet our and management's full-year outlooks.

Why it matters: Adjusted fiscal third-quarter earnings were $11.3 million, up from $6.2 million in the year-ago period. This doesn't have a material impact on our full-year outlook, since most of NJR's earnings are during the first half of its fiscal year, which includes the winter months. Management tightened its 2026 EPS guidance range to $3.52-$3.62, in line with our outlook. Management had raised its guidance range the last two quarters, primarily to incorporate better-than-expected results at the energy services segment. NJR expects a jump in midstream earnings during the next year from recontracting and storage capacity expansions.

The bottom line: We are reaffirming our $53 fair value estimate and Narrow Morningstar Economic Moat Rating for New Jersey Resources. NJR's stock trades at a 5% premium to our fair value estimate as of the Aug. 5 close. The stock is up 22% year to date, including dividends, making it one of the top-performing US utilities. We continue to forecast 8% annual core earnings growth from normalized 2025 earnings, in line with management's 7%-9% target. Normal winter weather could result in mostly flat earnings in 2027 after two years of outperformance at energy services.

Big picture: Management reaffirmed its five-year capital investment plan totaling $4.8 billion-$5.2 billion, in line with our outlook. NJR filed a base rate review in June requesting a $157.6 million rate increase with a 10.1% return on equity. We expect regulators to approve a rate increase in line with NJR's current 9.6% allowed ROE. NJR increased its installed solar capacity by 5% to 537 megawatts in the quarter and continues to have a 1.2-gigawatt pipeline of safe harbor solar capacity.

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Our fair value estimate is $53 per share after incorporating recent financial results and operational updates.

We assume 8% average annual consolidated earnings growth through 2029. Favorable winter weather in 2026 should boost the energy services segment's earnings, resulting in another impressive year of earnings growth after adjusting for the $0.30 per share gain on the sale of its residential solar business in 2025.

The bulk of our near-term core growth forecast comes from NJR's distribution utility. We forecast 6% annual earnings growth at NJR's regulated utility. This assumes 1% annual customer growth and more than $1 billion of capital investment in 2026-27, in line with management's plan.

NJR's solar investments are set to ramp up in 2026-28. We expect NJR's installed commercial solar capacity to double by 2028 if it can close even a modest share of its 1.2 gigawatt project pipeline.

At the midstream business, we assume NJR completes its expansion plans at the existing Leaf River caverns by 2029. We assume no major acquisitions.

Our long-term normalized growth rate assumption beyond 2030 is lower than our assumption for most electric utilities, reflecting the lack of data center demand growth. We don't consider anti-gas environmental regulations a near-term threat, especially given recent concerns about rising electricity prices.

We use a 5.9% weighted average cost of capital in our discounted cash flow valuation, including a 7.5% cost of equity.

NJR owns a difficult-to-replicate network of natural gas distribution and midstream assets, providing an essential energy source to customers in New Jersey.

In exchange for its New Jersey service territory monopoly, state regulators set customer rates for NJR's distribution utility at levels that aim to keep customer costs low while providing adequate returns for capital providers. This implicit contract between regulators and the utility should, in the long run, allow NJR to earn a small spread over its cost of capital.

NJR's rate-setting structures and overall regulatory environment are mostly constructive, consistently leading to returns on invested capital modestly above its cost of capital. We have strong confidence that NJR's ROICs will remain at a healthy spread over WACC for the foreseeable future, leading us to assign the company a narrow moat.

As with all regulated utilities, we think regulatory caps on revenue and returns preclude NJR from establishing a wide economic moat.

We consider its midstream business, which soon will contribute more than 10% of normalized earnings, to have efficient-scale competitive advantages consistent with a narrow economic moat.

NJR derives about 20% of its earnings and cash flows from businesses that have few competitive advantages, particularly its energy services business and renewable energy investments. These businesses would have to grow much faster than the core rate-regulated utility for us to consider re-evaluating NJR's economic moat.

NJR's customer base continues to grow faster than the national average and includes the wealthier regions of New Jersey.

NJR raised its dividend 6% for 2026 to $1.90 per share, its 30th consecutive annual increase. We expect that dividend growth streak to continue.

NJR's gas distribution utility has received four constructive rate case outcomes and regulatory approval for nearly all of its investment plan since 2016.

Rising interest rates can be headwinds for utilities as higher debt costs slow earnings growth and dividend yields are less attractive compared with fixed-income alternatives.

Gas prices, basis spreads, and extreme weather can result in earnings volatility at NJR's energy marketing business.

The long-term success of NJR's solar investments in part depends on state and federal renewable energy incentives.