Bull of the Day: National Fuel Gas Co. (NFG)

National Fuel Gas Company is a diversified energy company with natural gas assets in the prolific Appalachian Basin, which are utilized for the production and transportation of natural gas. The company provides interstate transportation services through an integrated gas pipeline system in Pennsylvania and New York, as well as storage services via its underground natural gas storage fields.

The stock is displaying relative strength and has been making a series of 52-week highs this year. Shares have held up extremely well through the recent market volatility. Increasing volume has attracted investor attention as buying pressure accumulates in this top-ranked stock.

A Zacks Rank #1 (Strong Buy), National Fuel Gas is part of the Zacks Oil and Gas Integrated US industry group, which currently ranks in the top 32% out of more than 250 industries. Because this group is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months.

Also note the favorable characteristics for this group below:

Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.

It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top industries, we can dramatically improve our stock-picking success.

Company Description

National Fuel Gas transports and stores natural gas for utilities, industrial companies and power producers. In addition, the energy player builds, owns, and operates gathering facilities in the Appalachian region. The company also sells natural gas to retail customers.

Systematic investments should strengthen the company’s operations and reduce greenhouse gas emissions. Its steady process of replacing and modernizing existing pipelines should further boost earnings. Furthermore, National Fuel Gas is in an ideal position to take advantage of data center and artificial intelligence prospects to serve growing demand for gas-fired power production.

In terms of shareholder-friendly initiatives, National Fuel Gas has returned more than $590 million to investors over the past three years. NFG approved a $200 million share repurchase program in March 2024, with a target to complete the program in fiscal 2025. The company has also raised its dividend rate consistently over many decades.

Earnings Trends and Future Estimates

National Fuel Gas NFG surpassed earnings estimates in three of the past four quarters. The company most recently delivered fiscal first-quarter earnings back in January of $1.66 per share, which represented a 5.7% surprise over the Zacks Consensus Estimate.

NFG has delivered a trailing four-quarter average surprise of 8.3%. Consistently beating earnings estimates is a recipe for success.

Analysts covering NFG have upped their fiscal second-quarter EPS estimates by 2.84% in the past 60 days. The Q2 Zacks Consensus Estimate now stands at $2.17 per share, translating to growth of 21.2% relative to the year-ago period. With the release set for Wednesday after the bell, investors should keep in mind that stocks can be volatile surrounding earnings announcements.

Let’s Get Technical

This market leader has seen its stock advance nearly 30% already this year, all while the general market witnessed a drastic correction. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.

Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of higher highs throughout the past year. With both strong fundamental and technical indicators, NFG stock is poised to continue its outperformance.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, NFG has recently witnessed positive revisions. As long as this trend remains intact (and NFG continues to deliver earnings beats), the stock will likely continue its bullish run.

Bottom Line

Backed by a leading industry group and history of earnings beats, it’s not difficult to see why NFG stock is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly justify adding shares to the mix.

NFG is ranked favorably by our Zacks Style Scores, with second-best ‘B’ ratings in each of our Growth and Momentum categories. This indicates that shares are likely to move higher based on a promising combination of momentum in earnings and sales trends along with price performance.

Recent positive earnings estimate revisions should also serve to create a ‘floor’ in terms of any sudden or unexpected downside moves. If you haven’t already done so, be sure to put NFG on your shortlist.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research