Morningstar | NiSource Reports Weak 2Q; Investments On Track and No Change to FVE
We are reaffirming our $26 fair value estimate after narrow-moat NiSource reported weak 2018 second-quarter earnings, reaffirmed its 2018 guidance, and indicated that it is on track for $1.7 billion-$1.8 billion of full-year capital expenditures. NiSource reported net operating EPS of $0.07 in the recently ended quarter versus $0.10 in the year-ago period. The company reaffirmed its full-year guidance range of $1.26-$1.32 per share, and our estimate of $1.29 per share, at the midpoint of guidance, is unchanged.The poor second-quarter results are not a concern. The second quarter is typically the weakest earnings quarter, and there remains a mismatch between income taxes allocated to each quarter and revenue, owing to tax reform. Management’s comments about the tax timing issue and the strong performance on cost control (operation and maintenance costs for the year to date are 4% lower than last year) give us confidence in our 2018 earnings estimate.
Since NiSource is a completely regulated utility, we expect all tax reform benefits to eventually flow to customers. Lower rates result in less pushback from customers and regulators on NiSource’s expanded capital expenditure program, which we expect to total almost $9.5 billion during the next five years. Our capital expenditure forecast exceeds the upper end of management's $1.6 billion-$1.8 billion annual guidance.
The higher rate of investment would push annual adjusted earnings growth to over 10% during the next five years. However, owing to the $2 billion of equity issuances we expect over this time period, EPS growth will average 5.5%, in the bottom half of the 5%-7% guidance through 2020.
NiSource is an energy holding company. Through its subsidiaries, the company is a natural gas distribution company. The company's reportable segments are: Gas Distribution Operations and Electric Operations. For its gas distribution operations, through its wholly-owned subsidiary, NiSource Gas Distribution Group, Inc., the company owns distribution subsidiaries that provide natural gas to residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Massachusetts. Through its electric operations, the company generates, transmits and distributes electricity through its subsidiary, Northern Indiana Public Service Company LLC, and engages in wholesale and transmission transactions.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.