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NiSource Misses Q2 Earnings, Beats Sales

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Diversified utility, NiSource Inc. (NI - Free Report) posted net operating earnings of 23 cents per share in the second quarter of 2013, a penny or 4.2% lower than the Zacks Consensus Estimate. Earnings were however 4.5% higher than the year-ago quarter.

NiSource recorded GAAP earnings of 23 cents per share compared with 25 cents per share in the prior year.

Total Revenue

Gross revenue during the quarter increased 16.9% year over year to $1.2 billion from $1.03 billion. The improvement was mainly due to higher contribution from Gas Transportation and Storage, Electric Operations and Gas Distribution segments.

Total revenue also surpassed the Zacks Consensus Estimate by 5.6%.

Highlights of the Release

Total operating expenses increased 10.3% year over year to $666.4 million. The increase was mainly due to a 15.9% spike in operating and maintenance expenses.

In the wake of higher operating expenses, operating income inched down 1.9% to $194.7 million.

The effective tax rate was 31.3% versus 34.4% for the same period last year.

Financial Position

As of Jun 30, 2013, NiSource had cash and cash equivalents of $44.5 million, up from $36.3 million as of Dec 31, 2012.

Long-term debts (excluding debts due within a year) as of Jun 30, 2013 were $7.6 billion versus $6.8 billion as of Dec 31, 2012. In the first half of the year, the company issued $750 million in long-term debt at favorable interest rates and increased its existing three-year bank term loan by $75 million to $325 million.

Cash flow from operating activities in the first half of 2013 increased 15.9% to $894.5 million from $771.8 million in the comparable prior-year period. The company distributed dividends worth $149.5 million in the first half of 2013 versus $130.4 million in the prior-year period.

2013 Guidance

NiSource reiterated its 2013 operating earnings per share guidance in the range of $1.50 to $1.60. The company did not provide GAAP figures but indicated that 2013 GAAP numbers would differ from operating earnings due to unpredictable weather and other factors affecting comparability.

Other Company Releases

CMS Energy Corp. (CMS - Free Report) reported earnings of 29 cents per share in the second quarter of 2013, lagging the Zacks Consensus Estimate of 34 cents by 14.7%.

Empire District Electric Co. announced second-quarter 2013 operating earnings of 27 cents per share, 8.0% above the Zacks Consensus Estimate of 25 cents.

Northwestern Corporation (NWE - Free Report) announced second-quarter 2013 operating earnings of 35 cents per share, 16.7% above the Zacks Consensus Estimate of 30 cents.

Our View

We appreciate NiSource’s decision to enhance its capital expenditure for 2013 by $200 million to $2 billion. Nearly 75% of the company's capital investments were focused on accretive growth and other revenue-generating investments. This will definitely benefit the top-line and expand margins.

In the first half of 2013, NiSource was able to register a 0.6% increase in its gas customers and a 0.2% increase in electricity customers. The growth in the customer base was also accompanied by an increase in sales volume. The development plans undertaken by NiSource will allow it to increase reliability of its services and add more customers.

Merrillville, Ind. based NiSource is an energy holding company founded in 1912. Along with its subsidiaries, the company provides natural gas, electricity and other products and services in the U.S. The company currently has a Zacks Rank #2 (Buy).

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