On Monday, Stifel adjusted its outlook on Northwest Natural Gas (NYSE:NWN), increasing the stock's price target to $45.00, up from the previous $40.00, while reaffirming a Buy rating on the shares.
The revision followed the company's second-quarter financial results for 2024, which surpassed the firm's expectations. Despite a recent dip in the stock's performance attributed to a rate case settlement that fell short of projections, Stifel emphasized the potential for future revenue growth.
The rate case outcome, primarily affected by under-recovery of depreciation, was identified as a contributing factor to the stock's underperformance. However, Stifel highlighted that Northwest Natural Gas is anticipated to gain additional revenue streams from its water business and a renewable natural gas (RNG) project expected to commence in 2025. These developments are seen as significant growth drivers beyond the rate case.
Stifel also noted the prospective benefits stemming from Northwest Natural Gas's recent water acquisitions, including Puttman Infrastructure and ICH. These strategic moves are expected to contribute to the company's financial performance going forward. The firm's updated price target is now based on fiscal year 2025 estimates, reflecting a forward-looking valuation approach.
The maintained Buy rating suggests that Stifel continues to view Northwest Natural Gas as a favorable investment. The analyst's statement provided a reminder to investors about the company's diverse avenues for growth, which include expansions in the water sector and renewable energy initiatives, alongside the traditional gas business.
Stifel's revised price target and continued endorsement of Northwest Natural Gas reflect an optimistic outlook for the company's future financial health, considering the upcoming projects and acquisitions set to contribute to its revenue.
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