By Globalfinserve Business Desk
March 2025
National Fuel Gas Company (NYSE:NFG) is set to deliver robust operational performance in its upcoming Q2 2025 earnings report, driven by higher-than-expected production volumes and favorable natural gas pricing trends. According to J.P. Morgan analyst Zach Parham, the company’s strong production numbers could lead to revised FY25 guidance and increased investor confidence.
Key Takeaways from J.P. Morgan’s Analysis
- Analyst rating: Neutral.
- Price target: $81.00 per share.
- Expected Q2 production:
- 1,203 million cubic feet per day (MMcf/d) or 108.2 billion cubic feet equivalent (Bcfe).
- This is 6% higher than the Street consensus estimate of 1,138 MMcf/d (102.5 Bcfe).
- FY25 production forecast:
- 420.2 Bcfe, exceeding the consensus estimate of 417.5 Bcfe.
- Q2 EPS and EBITDA:
- Expected to align with the consensus estimate, with higher production volumes offsetting potential pricing volatility.
- Future production outlook:
- Flat production expected in Q3 (108.3 Bcfe).
- Slight decline in Q4 (105.8 Bcfe), consistent with NFG’s production forecast.
✅ Higher Gas Prices Driving Revenue Growth
Parham anticipates that rising natural gas prices will prompt NFG to raise its FY25 guidance once again.
- The analyst projects FY25 EPS of $7.43, surpassing:
- The company’s current guidance range of $6.50 – $7.00 (based on $3.50 per Mcf gas prices).
- The previous upper-end guidance of $6.90 – $7.40 (based on $4 per Mcf gas prices).
- This upward revision reflects improved pricing conditions and higher-than-expected production output.
✅ EPS Growth Forecast Through 2027
J.P. Morgan’s forecast highlights strong EPS growth for NFG over the next three years:
- Compound Annual Growth Rate (CAGR): 20% through 2027.
- FY26 EPS projection:
- Estimated at $9.22.
- 13% higher than the current consensus estimate of $8.17.
✅ Share Buyback Program Enhancing Shareholder Value
Despite NFG shares trading near all-time highs, the company remains active in its share repurchase program, reflecting confidence in its future performance.
- Q2 buybacks:
- Expected share repurchases worth $34 million.
- Full-year buyback outlook:
- NFG plans to fully utilize its $200 million share repurchase authorization by the end of the fiscal year.
- Impact on stock value:
- Ongoing buybacks reduce the number of outstanding shares, boosting Earnings Per Share (EPS) and enhancing shareholder returns.
NFG’s Strategic Positioning: Production and Market Performance
NFG’s Q2 production growth and consistent capital returns position the company favorably for long-term profitability.
✅ Production and Guidance Trends:
- Higher production levels:
- The 6% production beat versus the consensus shows strong operational performance.
- This positions NFG well for potential guidance upgrades.
- Stable third-quarter production:
- NFG expects flat production in Q3 (108.3 Bcfe), signaling consistent output.
- Slight decline in Q4:
- Q4 production is forecasted at 105.8 Bcfe, aligning with the company’s conservative production guidance.
Natural Gas Price Outlook and Market Dynamics
J.P. Morgan’s bullish outlook on natural gas prices bodes well for NFG’s future earnings.
✅ Key Market Trends Driving Natural Gas Prices:
- Higher Domestic Demand:
- Rising demand from industrial sectors and increased LNG exports are driving prices higher.
- Geopolitical Tensions:
- Ongoing global energy uncertainties have kept natural gas prices elevated, benefiting NFG’s revenues.
- Weather-Related Demand:
- Seasonal weather fluctuations and heating demand have increased spot prices for natural gas.
Investment Takeaway: Should You Buy NFG Stock?
J.P. Morgan’s analysis reflects cautious optimism about NFG’s performance, maintaining a Neutral rating but with a potential upside.
✅ Reasons to Consider NFG:
- Strong Production Growth:
- NFG’s 6% production beat indicates strong operational execution.
- Guidance Upgrade Potential:
- With rising natural gas prices, NFG is likely to raise its FY25 guidance, boosting investor confidence.
- EPS Growth Potential:
- The projected 20% CAGR through 2027 indicates sustainable long-term growth.
- Share Buybacks:
- Ongoing share repurchases are enhancing EPS growth and shareholder value.
🚫 Reasons for Caution:
- High Share Price:
- NFG’s stock is trading near record highs, which may limit immediate upside potential.
- Natural Gas Price Volatility:
- Fluctuations in natural gas prices could affect future earnings performance.
✅ How to Gain Exposure to NFG
Investors interested in gaining exposure to NFG can consider:
- First Trust North American Energy Infrastructure Fund (NYSE: EMLP).
- First Trust EIP Carbon Impact ETF (NYSE: ECLN).
- Both funds provide diversified exposure to the energy sector, including NFG.
✅ Key Takeaways
- National Fuel Gas (NFG) is expected to beat production estimates in Q2, delivering 6% higher volumes than the consensus forecast.
- Rising natural gas prices could prompt NFG to raise its FY25 guidance, enhancing its growth outlook.
- J.P. Morgan projects a 20% EPS CAGR through 2027, making NFG an attractive long-term investment.
- The company’s share repurchase program is expected to boost EPS and shareholder value.
Conclusion
National Fuel Gas is poised for strong Q2 performance, with higher-than-expected production and potential guidance upgrades on the horizon. J.P. Morgan’s analysis highlights NFG’s positive growth trajectory, driven by higher natural gas prices, robust production, and strategic share buybacks.
As the company continues to outperform operationally, it presents a compelling investment opportunity for those seeking exposure to energy stocks with strong growth potential.
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