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NiSource's (NI) Long-Term Modernization Program Bodes Well

Zacks Equity Research

NiSource Inc.’s NI constant investments to strengthen existing infrastructure and focus on clean energy are going to drive its performance.

The Zacks Consensus Estimate for the company’s 2020 earnings is pegged at $1.34 per share on revenues of $5.63 billion. The bottom-line figure suggests 1.52% year-over-year improvement. The same for the top line indicates growth of 8.33% on a year-on-year basis.

What’s Driving the Stock?

NiSource is working on long-term utility infrastructure modernization program. In 2019, the company invested nearly $1.9 billion across the gas and electric utilities. It will make capital investments of nearly $1.8-$1.9 billion in 2020. The company continues to execute an estimated $30-billion investment for long-term infrastructure investments. This long-term infrastructure investment includes $20 billion for gas and $10 billion for electricity.

NiSource has a 100% regulated utility business model. More than 75% of NiSource’s capital expenditure starts to provide return in less than 18 months of investment. The company anticipates delivering targeted earnings and dividend growth of 5-7% annually through 2022 depending on other long-term growth opportunities.

Under NIPSCO's 2018 Integrated Resource plans (“IRP”), the company is seeking approval to retire 100% coal generating sources by 2028 with reliable and cleaner options at lower costs.  NiSource aims to reduce greenhouse gas emissions by 90% by 2030 and save more than $4 billion for customers over the long term.

However, NiSource also faces the risk of ageing infrastructure that needs regular replacement. Despite efforts made by NiSource to properly maintain assets through inspection, scheduled maintenance and capital investment, the old machineries can falter, resulting in unplanned outages. These are likely to have an adverse impact on operation, impacting the utility revenues and margins.

Zacks Rank & Price Performance

The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 12 months, shares of the company have lost 27.2% compared with the industry’s decline of 25.6%.

Stocks to Consider

Some better-ranked stocks from the same industry are NorthWestern Corporation NWE, Pacific Gas & Electric Co. PCG and Duke Energy Corporation DUK. NorthWestern sports a Zacks Rank #1, while Pacific Gas and Duke Energy carry a Zacks Rank #2 (Buy).

Long-term earnings growth of Pacific Gas & Electric, NorthWestern and Duke Energy is pegged at 2.50%, 3.10% and 4.70%, respectively.

Pacific Gas & Electric, NorthWestern and Duke Energy have trailing four-quarter positive earnings surprise of 7.35%, 7.62% and 6.53%, on average, respectively.

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