New Jersey Resources Corporation (NJR) Cash Flow Statement

The extreme quarterly OCF swings—from negative in summer quarters to over half a billion in winter—are typical for a gas LDC, but the magnitude of the 2026Q3 figure suggests strong regulatory recovery mechanisms. The 2026Q3 OCF of $577.8M is nearly double the prior year's same quarter, indicating that rate base expansion and decoupling mechanisms are translating into cash collections. However, the negative OCF in 2025Q3 and 2025Q1 highlights the timing mismatch between cost incurrence and recovery, which is a normal feature of the regulatory construct but warrants monitoring for any widening of the lag.

The sharp acceleration in CAPEX, particularly in 2026Q3, aligns with the prior income statement finding of rate base expansion driving revenue growth. The CapEx/OCF ratio of 95.7% in 2026Q3 shows that nearly all operating cash flow is being reinvested, which is typical for a utility in growth mode. However, the sustainability of this CAPEX pace depends on continued regulatory approval and the ability to recover investments through rates. The rising D&A trend (from $40.2M to $53.5M over ten quarters) confirms that the rate base is growing, but investors should monitor whether the earned ROE on this new investment exceeds the cost of capital.

The persistent FCF deficit is expected for a utility with an aggressive CAPEX program, but the financing mix is notable. The company has been issuing $1.0M in long-term debt each quarter, which is a nominal amount relative to the CAPEX, and net stock issuance has been small (ranging from -$58.4M to $38.1M). This suggests that NJR is funding a significant portion of its CAPEX from operating cash flow and existing cash balances, which may indicate a strong balance sheet. However, the reported debt-to-equity ratio of 1.58 is highly atypical for a utility and warrants verification; if accurate, it would imply a leveraged capital structure that could strain future financing capacity. The ability to access capital markets on reasonable terms appears intact given the consistent debt issuance, but the lack of large equity raises may limit future growth if FCF deficits persist.

The dividend appears safe on an annual basis, with cumulative OCF of $1.2B over the last four quarters versus dividends of $284.3M, implying a coverage ratio of 4.2x. However, the quarterly volatility is extreme, with negative coverage in summer quarters when OCF is weak. This is typical for gas utilities, but the 2026Q3 dividend payment of $143.5M is nearly three times the typical quarterly dividend, suggesting a possible special dividend or a timing shift. Investors should monitor whether the dividend growth rate (which has been consistent) is sustainable given the CAPEX demands and the potential for regulatory lag. The strong annual coverage provides a cushion, but any prolonged regulatory setback could pressure the payout.

The divergence between net income and OCF is particularly stark in 2026Q2, where OCF is 2.6x net income, and in 2026Q3, where net income is only $9.7M but OCF is $577.8M. This suggests that non-cash items, such as unrealized gains/losses on derivatives and regulatory deferrals, are distorting reported earnings. The prior income statement analysis noted that EPS growth was distorted by MTM gains, and the cash flow data confirms that these gains do not translate into cash. Investors should focus on 'Economic Net Income' as management presents, which adjusts for these items, to assess the true cash-generating ability of the regulated operations. The high OCF relative to net income in winter quarters may also reflect the collection of deferred fuel costs, which is a positive sign for regulatory recovery.