National Fuel Gas (NFG) Separation Plan Puts Its Undervalued Narrative To The Test

National Fuel Gas (NFG) has proposed a major restructuring, announcing plans to separate its Integrated Upstream and Gathering business from its pipeline, storage, and utility operations.

The separation headlines arrive as National Fuel Gas trades at US$79.92, with the 1-day share price return of 1.96% hinting at fresh interest after a year-to-date share price return that is down 2.61%. While the 1-year total shareholder return declined 5.09%, the 3-year total shareholder return of 67.32% and 5-year total shareholder return of 57.64% point to a story where long term holders have still been rewarded and are now reassessing the restructuring through that lens.

Scan how investors are pricing restructuring stories like National Fuel Gas by comparing it with list of solid balance sheet and fundamentals (25 results) in similar capital intensive sectors.

Restructuring is now on the table and a long-term track record is already in the bag. The real tension for National Fuel Gas is simple: Is meaningful upside still ahead, or has most of the rerating already happened in the rearview mirror?

Most Popular Narrative: 14% Undervalued

On the narrative view, National Fuel Gas screens as undervalued, with a fair value of $93 against the latest close at $79.92. This puts the spotlight on what actually has to happen for that gap to close.

The main thing that has to go right is successful execution on the Ohio gas utility integration and upstream development plan, while keeping net debt to EBITDA in the low 2x range and sustaining the long dividend record.

The current valuation implies investors are not fully pricing in the company’s plan for 7% to 10% annual EPS growth through fiscal 2029, the projected US$1.0b to US$1.5b of free cash flow, and the shift toward a higher regulated earnings mix. This is why this narrative views National Fuel Gas as undervalued and bullish.

See why 17 investors see National Fuel Gas as 14% undervalued.

Result: Fair Value of $93 (UNDERVALUED)

Still, the National Fuel Gas story can change quickly if upstream execution keeps missing guidance or if the Ohio utility deal delivers weaker regulatory outcomes than analysts expect.

Find out about the key risks to this National Fuel Gas narrative.

Next Steps

The overall tone of the National Fuel Gas story is mixed so far. For a more complete view, consider examining the full picture and weighing both sides by checking the 4 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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