NiSource Lags, Guides Favorably - Analyst Blog

By
A A A

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
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DTE , NI , WEC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

My Career No Longer Exists
My Career No Longer Exists          

Stocks

Referenced

100%
100%
100%

Most Active by Volume

105,767,201
  • $46.30 ▲ 19.98%
80,574,036
  • $15.58 ▲ 1.56%
66,424,299
  • $3.46 ▲ 1.76%
42,459,394
  • $3.82 ▲ 0.79%
36,704,800
  • $13.98 ▼ 14.02%
35,625,113
  • $74.677 ▲ 1.31%
33,067,430
  • $29.26 ▼ 0.71%
32,374,580
  • $98.15 ▼ 0.23%
As of 7/30/2014, 04:04 PM