NiSource Inc. (NI) is set to release its third-quarter 2013 financial results before the market opens on Oct 31, 2013. The utility company reported a negative surprise of 4.17% in the last quarter. Let’s see how things are shaping up prior to this announcement.
Factors to Consider this Quarter
NiSource mainly focuses on core, rate-regulated asset-based businesses. The company experienced positive rate changes from its Pennsylvania case to recoup its prior invested funds. The new rate, effective Jul 1, 2013, which will likely boost its near–term revenue stream.
In Aug 2013, the company completed the natural gas compressor upgrade project at its Majorsville compressor facility in Dallas, W. Va. The new compressors have increased the facility’s capacity by 1800 horsepower, thereby boosting service reliability and increasing throughput volumes by 70–80 million cubic feet per day, which is double the previous level.
On the flipside, NiSource’s electricity-generating assets are primarily fueled by coal and natural gas. We believe volatile commodity prices and fluctuations in associated transportation costs will likely increase the company’s operating expenses.
Further, the company’s distribution and transmission activities are exposed to threats from leakages, accidents and natural disasters, which could lead to extensive financial losses. NiSource experienced a pipeline explosion accident in late 2012.
Earnings Whispers
Our proven model does not conclusively show that NiSource is likely to beat earnings this quarter. That is because a stock needs to have both a positive Zacks Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.
Negative Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -5.56%.
Zacks Rank #3 (Hold): NiSource’s Zacks Rank #3 (Hold) combined with an ESP of -5.56% makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies directly related to the utility industry which are worth considering on the basis of our model. They have the right combination of elements to post an earnings beat this quarter:
Alliant Energy Corporation (LNT), Earnings ESP of +4.55% and Zacks Rank #2 (Buy).
Northeast Utilities (NU), Earnings ESP of +1.37% and Zacks Rank #2 (Buy).
Black Hills Corporation (BKH), Earnings ESP of +2.27% and Zacks Rank #3 (Hold).
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