JPMorgan Believes South Jersey Industries Shares 'Reflect Appropriate Risk To 2020 Earnings'

JPMorgan initiated its coverage on South Jersey Industries Inc (NYSE: SJI) shares with a Neutral rating and price target of $31 by December 2017. The brokerage believes the company's shares reflected appropriate risk to the earnings of the year 2020.

JPMorgan analysts Christopher Turnure, Christopher Salley and Andrew Pon commented, "Utility capital and FERC regulated projects create growth potential in excess of that of many gas utility peers and are the main building blocks of what we view as a not unrealistic $150 million net income target by 2020. However, dependence on rate cases, shifting pipeline approval schedules and contributions from projects not yet approved add timing and other risk to this growth."

Related Link: Guggenheim Securities Initiates Coverage On South Jersey Industries At Buy

As a result, the brokerage views growth as more heavily weighted toward the end of the 2016–20 period, and expects shares reflecting this risk at the current level. The analyst thinks that Utility, FERC regulated investments drive above-average growth.

As far as FERC side, Credit Suisse thinks that the PennEast project was delayed recently by one year on permit issues. The analysts said, "We currently have little visibility into other incremental FERC-regulated projects contemplated in the 2020 plan."

The brokerage expects robust customer count growth to be a positive differentiating factor compared to the gas utility rivals with South Jersey Industries realizing 1.3–1.7 percent annual growth since 2012. Credit Suisse expects the overall customer growth trend to continue until 2019 and model a mildly diminishing gain per year compared to the existing 1.7 percent.

Shares of the company traded 1.06 percent lower on Monday to $29.79 at time of writing.