Diversified utility,
NiSource Inc.
(
NI
) posted net operating earnings of 32 cents per share in the fourth
quarter of 2011, falling short of the Zacks Consensus Estimate of
35 cents and the year-ago quarter's operating earnings of 33 cents
per share.
NiSource's operating earnings of 2011 were $1.35 per share
compared with $1.22 per share reported in 2010. The results were in
line with the Zacks Consensus Estimate.
NiSource recorded GAAP earnings for 2011 of $1.08 per share
compared with $1.03 per share in the previous year. The difference
of 27 cents between operating and GAAP earnings, during the
financial year, was due to certain one-time items.
Total Revenue
Gross revenue during the quarter declined 13% year over year to
$1,450.7 million from $1,667.6 million in the year-ago quarter. The
decline in revenue was mainly due to the lower contribution from
the
Gas Distribution
segment whichdecreased 24.9%, offset by 4.1% growth in
Electric Operations
and
1
.4% growth in the
Gas Transportation and Storage
.
Reported quarter revenue missed the Zacks Consensus Estimate of
$1,607 million.
NiSource's total revenue for 2011 was $5,794.9 million versus
$5,818.3 million reported in the prior year, reflecting a decline
of 0.4%. Despite higher contribution from
Gas Transportation and Storage
,
Electric Operations
and
Corporate and Other Operations
,theyear-over-year decline was attributable to a dull
Gas Distribution segment.
Fiscal year 2011 revenue also missed the Zacks Consensus
Estimate of $6,258 million.
Segment Details
Gas Distribution Operations:
Operating earnings during the fourth quarter were $144.9 million
versus $112.9 million in the year-ago quarter, reflecting a growth
of 28.3%.
Operating earnings from this segment for 2011 were $438.9
million versus $342.6 million reported in 2010, reflecting a growth
of 28.1%. The year-over-year growth was attributable to the
implementation of new rates under Columbia Gas of Ohio's approved
infrastructure replacement program and better residential and
commercial margins.
Despite an operating income growth in this segment, we are a
little worried about the year-over-year decline in the customer
count. The company has taken a hit on its commercial and industrial
customer base, while growth in its residential customer was a
partial offset.
Gas Transmission and Storage Operations:
Operating earnings during the fourth quarter were $89.0 million
versus $99.9 million in the year-ago quarter, reflecting a decline
of 10.9%.
Operating earnings from this segment for 2011 were $360.1
million versus $376.8 million reported in 2010, reflecting a
decline of 4.4%.
Electric Operations:
Operating earnings during the fourth quarter were $43.0 million
versus $43.4 million in the year-ago quarter, reflecting a decline
of 0.9%.
Operating earnings from this segment for 2011 were $203 million
versus $217 million reported in 2010, reflecting a decline of
6.5%.
The company experienced a year-over-year growth of 0.03% in
electric consumers, which lifted weather adjusted electric sales
volumes in 2011 by 3.3% to 17,386.6 Gigawatt hours (GWh) from
16,833.9 GWh recorded in 2010. However, the operating results
suffered due to lower residential and commercial margins and lower
environmental cost recovery rates.
Corporate and Other Operations
: The segment posted an operating loss of $24 million in the
quarter versus a loss of $8.4 million in the year-ago quarter.
In 2011, the segment posted a loss of $40.6 million versus a
loss of $21.1 million in the previous year.
Operational Update
Total operating expenses decreased 2.0% in the quarter to $658.0
million, while for the fiscal year expenses decreased by 1%.
Despite a year-over-year decline in revenue during the quarter
as well as in the fiscal, lower operating expenses benefited the
operating income of the company, increasing a respective 2.1% and
5% in the quarter and the full year.
The company also experienced a 4% year-over-year reduction in
interest expenses in 2011. Lower interest expenses were
attributable to redemption of high interwar bearing debts during
the year. However, the benefits were marginally offset by the issue
of new debts. The company issued $900 million debts during fiscal
2011.
Financial Position
As of December 31, 2011, NiSource had cash and cash equivalents
of $11.5 million, down from $9.2 million as of December 31,
2010.
Long-term debts (excluding the debts due within a year) of the
company as of December 2011, were $6,267.1 million versus $5,936.1
million as of December 31, 2010.
During the year the company renewed its revolving credit
facility of $1.5 billion for another four years.
A Glimpse into 2012
NiSource expects 2012 operating earnings per share in the range
of $1.40 to $1.50. The guidance takes into account the balanced
business strategy of the company and growth opportunities across
the board.
The company did not provide GAAP figures but indicated that GAAP
numbers for 2012 would differ from operating earnings due to
unpredictable weather and other factors affecting
comparability.
Capital expenditure for 2012 is expected to be $1.4 billion, up
25% over the prior year. The company continues on its strategy of
aggressive infrastructural investments, which will stand NiSource
in good stead in the years to come.
Our View
The company has lagged our expectation marginally. It has
chalked out future plans for overall infrastructure development;
the 25% upside in the planned capital expenditure for 2012 from
2011 levels is a testament to that fact. During 2011 the company
reduced its debt financing costs and extended its debt repayment
period, another commendable achievement.
We believe the strategic developments and initiatives taken by
the company to improve its performance will enable it to reach new
heights in 2012.
The stock currently retains a Zacks #3 Rank which translates
into a short-term Hold recommendation.
Merrillville, Indiana based NiSource is an energy holding
company whose subsidiaries provide natural gas, electricity and
other products and services in the U.S. Its operating subsidiaries
deliver energy to customers within the high-demand energy corridor
stretching from the Gulf Coast through the Midwest to New England.
The company competes with
DTE Energy Company
(
DTE
) and
Wisconsin Energy Corporation
(
WEC
).
DTE ENERGY CO (
DTE
): Free Stock Analysis Report
NISOURCE INC (
NI
): Free Stock Analysis Report
WISC ENERGY CP (
WEC
): Free Stock Analysis Report
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