NiSource (NI) Benefits From Clean Energy Goals & CAPEX Plans
NiSource Inc.’s NI focus on strengthening its existing infrastructure and efforts to increase production of clean energy are likely to boost its performance. Its strong liquidity position is a boon.
We issued an updated research report on this currently Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for 2021 earnings is pegged at $1.34 per share, indicating growth of 1.52% from the year-ago reported figure. The consensus mark for current-year revenues stands at $5.12 billion, suggesting 9.26% growth from the prior-year reported number. The company’s long-term (three to five years) earnings growth is pegged at 6.16%. In the past six months, shares of NiSource have rallied 15.5%, outperforming the industry's growth of 2%.
Six Months Price Performance
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What’s Driving the Stock?
NiSource is working on its long-term utility infrastructure modernization program, and aims to invest in the range of $9.6-$10.7 billion during the 2021-2024 time frame. The company has 100% regulated business model and more than 75% of its capital expenditure starts providing returns in less than 18 months of investment. This will drive its earnings per share, seeing a 7-9% CAGR in the above-mentioned period.
Through cost-saving initiatives, the utility plans to cut 8% of its operating and maintenance expenses in 2021 from its 2020 level. Such measures will boost the company’s margins over the long term. It had $1.9-billion worth liquidity at the end of first-quarter 2021 and $2.3 billion of committed facilities, which are adequate to meet its debt obligations.
The company aims to curb its greenhouse gas emissions by 90% within 2030 from its 2005 baseline and save more than $4 billion for customers of more than 30 years. The utility is planning to retire its 100% coal-generating sources by 2028 to replace the same with reliable and cleaner options at lower costs. It is scheduled to add nearly 1,030 MW of clean generation to its existing portfolio by 2023 end via joint ventures and the PPA agreement. NiSource apart, utilities like Duke Energy DUK, DTE Energy DTE and Xcel Energy XEL among others are undertaking measures to supply clean energy.
Headwinds
The utility is exposed to variability in cash flows associated with volatility in natural gas prices, which acts as an overhang on the stock. Despite efforts made to maintain its assets, the old machineries may turn defunct, causing unplanned outages and adversely impacting the company’s operations.
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