NiSource Inc. NI continues to gain from its investments to strengthen its existing infrastructure and focus on clean energy. However, high debt level is a concern amid a rising interest environment.
NiSource will make planned utility infrastructure investments and has identified long-term infrastructure investments worth $30 billion, with more than 90% of it allocated to regulated pipes and wires. Out of its planned $30 billion expenditure, the company will invest nearly $20 billion to strengthen its gas operations and $10 billion to boost its electricity operations.
More than 75% of the capital expenditure will begin contributing to earnings within 12 months of investment. The continued investments will allow NiSource to deliver its targeted earnings and dividend growth of 5-7% through 2020.
NiSource has a 100% regulated utility business model. Its planned regulated investments will improve reliability and safety of its services and provide efficient natural gas services to its increasing customer base. The company has made considerable progress on regulatory initiatives across the states where it operates. In addition, rate hikes already received by the company will help NiSource to continue with its infrastructure strengthening and modernization initiatives.
The debt-to-capital level ratio of the company is 63.28%, much higher than the S&P 500 level of 41.90%. In addition, the current ratio of NiSource is 0.52, much lower than the S&P 500 level of 1.35. The long-term debts of the company at the end of the third quarter were $7.5 billion, higher than $6.1 billion at 2016 end. If the company’s investment-grade credit rating drops from the present level, it could substantially increase the cost of borrowing of the company amid the rising interest rates.
Price Movement
Shares of NiSource has outperformed the industry in the last 12 months. The stock has gained 11.1% compared with the industry’s rally of 5.1% in the same period.
Zacks Rank & Other Stocks to Consider
NiSource currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the same industry include Atlantic Power Corporation AT, DTE Energy Company DTE and FirstEnergy Corporation FE. Each of the stocks carries the same Zacks Rank as NiSource. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Atlantic Power delivered an average positive earnings surprise of 29.21% in the last four quarters. Its 2018 Zacks Consensus Estimate for a loss of 13 cents narrowed from loss of 23 cents in the last 90 days.
DTE Energy pulled off an average positive earnings surprise of 3.81% in the last four quarters. Its 2018 Zacks Consensus Estimate moved up by 0.9% in last 90 days to $5.73.
FirstEnergy delivered an average positive earnings surprise of 4.67% in the last four quarters. Its 2018 Zacks Consensus Estimate moved up by 0.4% in last 60 days to $2.51.
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