How can you tell that the markets are going through a bit of a correction?
It's simple. Look at the 52-week highs versus 52-week lows. Yesterday, there were 76 52-week lows compared to 63 52-week highs. When the markets are really humming, you'll have days where there are 250 52-week highs compared to 20 52-week lows. That's not where we're at right now.
In yesterday's action, Stocktwits’ Trends with No Friends newsletter highlighted Western New York's National Fuel Gas (NFG), which hit its 56th 52-week high of the past 12 months. It was the only energy stock to hit a 52-week high.
The newsletter contends that stocks hitting new 52-week highs with a small following--NFG fits that criterion with just 394 Stocktwits followers--are prime candidates for continued outperformance relative to the overall markets as more investors jump on the bandwagon and discover the undiscovered.
Is National Fuel Gas such a stock? Or is it too late to jump on the bandwagon? I’ll answer both of these questions.
Is NFG Stock Ready for More Gains in 2025?
National Fuel Gas’s stock is up 52% over the past 12 months. That's over half the stock’s gains over the past five years, so there's no question it's on a roll. It's whether it can maintain this momentum.
So, who is National Fuel Gas? Your guess is as good as mine. I'd never heard of it until today.
National Fuel Gas is based in Williamsville, New York, a stone's throw from Buffalo Niagara International Airport. Although its history in Western New York dates back to 1825, its official start as National Fuel was in 1902 when assets from John D. Rockefeller’s Standard Oil Natural Gas Trust.
Today, it has four operating segments: Exploration and Production (45% of revenue), Pipeline and Storage (13%), Gathering (1%), and Utility (41%).
The company’s biggest asset is the Exploration and Production segment's 1.2 million net acres in the Appalachian Basin in New York and Pennsylvania, which produces 1.0 Bcf/d (billion cubic feet of natural gas per day) and generates approximately 49% of its adjusted EBITDA. E&P is the unregulated segment of the National Fuel Gas’s business.
The company's second-biggest asset is its 2,600-mile pipeline and 29 storage fields for its Pipeline and Storage Segment. These assets are part of its regulated business, which has a total rate base of $1.6 billion and is regulated by the Federal Energy Regulatory Commission (FERC). The business accounts for 38% of National Fuel Gas’s adjusted EBITDA.
Its success lives and dies with these two segments.
When it reported its Q1 2025 results at the end of January, the company raised its guidance for 2025 earnings per share to $6.75, at the midpoint of its outlook. At the same time, it raised its Bcfe (billions of cubic feet equivalent) by 2% to 418 at the midpoint of its guidance.
Therefore, it trades at 11.0x its 2025 guidance and 8.4x Wall Street’s 2026 estimate of $8.77 a share, lower than many of its peers in the gas utilities industry.
Is It Too Late to Jump on the Bandwagon?
At first blush, given its current valuation, you would have to say no, it’s not too late. Despite a 52% gain in the past year and trading at or near a 52-week and all-time high, it remains reasonably priced.
So what could go wrong?
As of Dec. 31, it had a net debt of $2.84 billion, or 42% of its $6.71 billion market cap. Its interest expense in the trailing 12 months ended Dec. 31 was $141.7 million, or over 7% of its revenue and 23% of its pre-tax earnings.
Its current Altman Z-Score is 1.18, which indicates the likelihood of a company going bankrupt in the next 24 months. Anything under 1.81 is considered in possible distress. Exxon Mobil’s (XOM), for comparison, is 4.18, 3.5x higher than Natural Fuel Gas's.
It’s not unmanageable but something to watch out for if natural gas prices don’t rise as expected in the next 12 months.
Another thing to remember is that the company has had $660.9 million in pre-tax asset impairment charges in the last 12 months through Q1 2025, including $141.8 million in the first quarter.
“Seneca’s [National Fuel Gas’s E&P business] first quarter GAAP earnings decreased $99.3 million versus the prior year. This was driven by non-cash, pre-tax impairment charges of $141.8 million ($104.6 million after-tax), the majority of which is related to a ‘ceiling test’ impairment which required Seneca to write-down the book value of its reserves under the full cost method of accounting,” stated National Fuel Gas’s Q1 2025 press release.
While it’s normal to have these non-cash impairment charges as commodity prices change, altering the value of reserves, etc., you should be aware of them as you evaluate NFG stock.
The Bottom Line on National Fuel Gas Stock
As a dividend investor, you’ll appreciate that the company has increased its annual dividend for 54 consecutive years.
As a result, including dividends, the stock generated a 15.9% total annual return over the past five years, better than the performance of the oil and gas industry and the broader U.S. market.
Further, the Barchart Technical Opinion is a Strong Buy, suggesting that NFG stock will continue to increase, at least in the near term, NFG stock will continue to increase.
If you’re an aggressive investor, I’d say you’re not too late to the party. It’s a Buy.
