Northwest Natural Holding Company

NWN Details

Northwest Natural Holding Company (NYSE: NWN) is a holding company. It operates through its subsidiaries as a provider of natural gas services. It holds NW Natural Gas Company (NW Natural), NW Natural Water Company (NW Natural Water), and other business interests.

Results Performance for the Year Ended 31 December 2021 – (FY21)

• For FY21, the company reported a net income of $78.7 million, up 11% YoY primarily due to customer growth and new rates in Oregon and Washington for natural gas utility, partially nullified by higher cost.
• The net income from other activities grew primarily due to higher asset management revenues related to a February 2021 cold weather event.
• The company added over 11,400 natural gas meters in the last 12 months, equating to a 1.5% growth rate.
• The signed contract is expected to double the size of the water utility business via the Far West Water & Wastewater acquisition and purchased an ownership stake in Oregon

Source: Company Reports, Analysis by Kalkine Group

Outlook

The company shared 2022 earnings guidance to be between $2.45-$2.65 per share, anticipating customer growth, normal weather conditions, and no phenomenal changes in prevailing regulatory policies and other factors. It increased its long-term EPS growth target to 4-6% compounded annually from 2022 through 2027, an increase from its earlier range of 3-5%. NW Natural capital expenditures for 2022 are forecasted to be between $310-$350 million, and for the five years from 2022-2026 is expected to ambit from $1.3-$1.5 billion.

Key Risks

The group’s businesses are exposed to regulatory risk, including changes in the regulatory environment or an adverse outcome in regulatory proceedings. Further, its NGD business is prone to the impact of increased competition. Moreover, NW Holdings’ and NW Natural’s businesses are susceptible to various development and operational risks.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Stock Recommendation

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis) and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering higher operations, maintenance expenses, and other business cost in FY21 over FY20.

Considering the aforementioned factors, the current trading levels, and the associated business risks, we advise the investors to book profits. We give a “Sell” rating on the stock at the current market price of $54.22 per share as of 3^rd March 2022 (Time: 9:59 AM, NY, USA).

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Northwest Natural Holding Company (NWN) is a part of Kalkine’s Global Green Energy Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.