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NiSource Meets Q3 Earnings Ests

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Diversified utility, NiSource Inc. (NI - Free Report) posted operating earnings from continuing operation of 18 cents per share in the third quarter of 2013, in line with the Zacks Consensus Estimate. Earnings however jumped considerably from the year-ago profit level of 4 cents, backed by continued execution of significant midstream and other infrastructure investments.

NiSource recorded GAAP earnings of 16 cents per share compared with 5 cents per share in the prior year.

Total Revenue

Gross revenue during the quarter increased 14.0% year over year to $1,083.0 million from $949.6 million. The top-line rise came on the back of higher contributions across the company’s segments, comprising Gas Distribution, Gas Transportation and Storage, Electric Operations and Other segments.

Highlights of the Release

Total operating expenses increased almost 10% year over year to $666.6 million. The increase was mainly due to a 5.7% spike in operating and maintenance expenses and an 18.7% increase in depreciation and amortization expenses.

However, the company’s operating income surged 47.9% year over year to $183.7 million during the quarter.

Financial Position

As of Sep 30, 2013, NiSource had cash and cash equivalents of $14.9 million, down from $36.3 million as of Dec 31, 2012.

Long-term debts (excluding debts due within a year and including current portion) as of Sep 30, 2013 were $7,630.3 million versus $7,326.3 million as of Dec 31, 2012. The company's $340 million forward sale equity issuance, completed on Sep 10, 2012, added approximately 24 million common shares outstanding.

Cash flow from operating activities in the first nine months of 2013 increased 12.2% to $1,067.7 million from $951.7 million in the comparable prior-year period.

2013 Guidance

NiSource remains well on track to meet its 2013 earnings expectation of $1.50 to $1.60 per share. The company also stated that its operating units are executing well on an enhanced capital investment program totaling approximately $2 billion in 2013. NiSource remains focused on earnings-accretive infrastructure replacement and modernization programs.

At the Peer

The Zacks Ranked #2 (Buy) American Electric Power Company Inc. (AEP - Free Report) reported third quarter 2013 operating earnings of $1.10 per share, beating the Zacks Consensus Estimate of $1.08 by 1.9%. The quarterly figure also improved 7.8% from the year-ago profit level of $1.02. This improved performance reflects positive returns from the investments made in the company’s regulated operations.

Our View

We appreciate NiSource’s capital expenditure program of $2 billion for the year, nearly 75% of which is focused on accretive and other revenue-generating investments. This will likely benefit the company’s top-line, thereby expanding margins.

In the first nine months of 2013, NiSource was able to register a 0.5% increase in its gas customers and a 0.3% increase in electricity customers. The growth in the customer base was also accompanied by an increase in sales volume in its electric operations; the gas business was however an exception. The development plans undertaken by NiSource will increase reliability of services and hence attract 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 #3 (Hold).

Other well-placed companies in the space right now are Alliant Energy Corp. (LNT - Free Report) and Brookfield Infrastructure Partners L.P. (BIP - Free Report) , both carrying a Zacks Rank #2 (Buy).

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