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NiSource's (NI) Systematic Capital Investments Bode Well

Zacks Equity Research

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

We issued an updated research report on this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s long-term (three to five years) earnings growth is pegged at 5.80%.

What’s Driving the Stock?

NiSource is working on long-term utility infrastructure modernization program. It will make capital investments of nearly $1.7-$1.8 billion in 2020. The company continues to execute on 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 long-term targeted earnings and dividend growth of 5-7% annually with 2021 as the base year.

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. The company aims to reduce greenhouse gas emissions by 90% by 2030 and save more than $4 billion for customers over 30 years.

The company exited the first quarter with $1.3 billion liquidity, which is adequate to meet its current debt obligations. To strengthen its liquidity position, the company issued $1 billion of 3.6% notes, maturing by 2030.

However, aging infrastructure, volatility in natural gas prices and inconsistent weather conditions might deter NiSource’s growth.

Price Performance

In the past 12 months, shares of NiSource have lost 12.8% compared with the industry's decline of 2.3%.

Stocks to Consider

A few better-ranked stocks from the same sector are Southwest Gas Corporation SWX, Sempra Energy SRE and NextEra Energy, Inc. NEE. All three stocks hold a Zacks Rank #2 (Buy) at present.

The long-term earnings growth rate of Southwest Gas, Sempra Energy and NextEra Energy is pegged at 6%, 6.90% and 7.70%, respectively.

Southwest Gas, Sempra Energy and NextEra Energy reported positive earnings surprise of 3.92%, 32.76% and 7.69%, respectively, in the last reported quarter.

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Sempra Energy (SRE) : Free Stock Analysis Report
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