NiSource's mixed earnings performance in the first quarter of
2012 can be attributed to improvement in key business areas
tempered by a mild winter. Earnings per share increased by 2 cents
to 76 cents per share while revenue slipped to $1.7 billion from
$2.14 billion in the year-ago quarter.
Considering its wide operational area, which comprises 50% of
the nation's natural gas consumption, we believe extreme weather
conditions might negatively affect the company's earnings outcome.
Keeping this in view, we reiterate our Neutral recommendation on
NiSource Inc
. (
NI
).
We expect the company's proposed capital investment of $1.4 billion
will add an impetus to its investment driven growth strategy.
Besides, its electric segment is involved in pro-environment
investments, which will further ensure efficient energy services as
well as drive growth in its service territories. The company has
also undertaken a $4 billion program over a 10- to 15-year period
which will aid in the company's goal of modernizing its
infrastructure in the long term to enhance the reliability and
flexibility of its pipeline business.
However, volatile commodity prices as well as fluctuations in
associated transportation costs are significant overhangs.
Furthermore, we expect NiSource's cost of compliance with
environmental regulations to be substantial while exposure of the
company's distribution and transmission businesses to natural
disaster and accidents could lead to extensive financial losses.
On a positive note, the company tasted success in rate cases with
each of its three business segments experiencing earnings growth.
Also, NiSource is expected to continue its marked progress in its
liquidity and financing needs, providing sufficient financial
flexibility for the smooth functioning of its overseas projects.
NiSource reaffirmed its earnings guidance for 2012 in the range of
$1.40 to $1.50 per share. The Zacks Consensus Estimates for the
second quarter and 2012 are currently pegged at 20 cents per share
and negative $1.45 per share, respectively.
The company presently retains a Zacks #3 Rank which translates into
a short-term Hold rating. The company's peers include
Consol Energy Inc.
(
CNX
) and
Peabody Energy Corporation
(
BTU
).
Based in Merrillville Indiana, NiSource, an energy holding company,
through its subsidiaries, provides natural gas, electricity, and
other products and services. It operates in three segments: Gas
Distribution Operations, Gas Transmission and Storage Operations,
and Electric Operations.
PEABODY ENERGY (BTU): Free Stock Analysis
Report
CONSOL ENERGY (CNX): Free Stock Analysis Report
NISOURCE INC (NI): Free Stock Analysis Report
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