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NiSource (NI) Benefits From Investment & Debt Management

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NiSource Inc. (NI - Free Report) has been gaining from consistent investments to strengthen its existing infrastructure. Efficient debt management, cost-saving initiatives and a focus on clean renewable energy generation are likely to drive its performance over the long run.

NiSource currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2022 earnings per share of NiSource has moved up 5.8% year over year. NI’s long-term (three to five years) earnings growth is currently pegged at 7.2%. Moreover, NiSource’s current dividend yield of 3% is better than the Zacks S&P 500 composite’s average of 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tailwinds

NiSource is working on the long-term utility infrastructure modernization program and plans to invest in the range of $2.4-$2.7 billion in 2022. The company estimates $40-billion long-term natural gas and electric infrastructure investment opportunities, which are expected to drive earnings beyond 2024. Planned regulated investments will improve the reliability and safety of NI’s services and provide efficient electric and natural gas services for its increasing customer base. Through cost-saving initiatives, NiSource expects to lower operation and maintenance expenses.

NiSource’s long-term debt as of Mar 31, 2022 was $9,179.8 million compared with $9,183.4 million as of Dec 31, 2021. Its times interest earned ratio was 3.6 in the first quarter of 2022, up from 1.7 in the first quarter of 2021. The total debt to capital declined to 56.4% for the first quarter of 2022 from 61.8% at the end of 2021. NiSource had $1.9 billion net liquidity available as of Mar 31, 2022, which is adequate to meet debt obligations.

Headwinds

NiSource’s aging infrastructure and unfavorable fluctuations in weather conditions can lower demand for services, which, in turn, can lower earnings and operational margins. The timely completion of projects within budget might not be possible, which can further increase the capital costs of the company. NiSource is also exposed to increasing interest rates on borrowings, which can adversely affect the operating and financial results.

Price Performance

In the past year, shares of NI have rallied 24.6% compared with the industry’s 11.4% growth.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the same industry are American Electric Power (AEP - Free Report) , DTE Energy (DTE - Free Report) and Hawaiian Electric Industries (HE - Free Report) , each currently carrying a Zacks Rank #2 (Buy).

The long-term earnings growth of American Electric Power, DTE Energy and Hawaiian Electric Industries is projected at 6.2%, 6% and 3.2%, respectively.

American Electric Power, DTE Energy and Hawaiian Electric Industries’ current dividend yield of 3%, 2.6% and 3.2% is better than the Zacks S&P 500 composite’s average of 1.5%.

AEP, DTE and HE delivered an average earnings surprise of 2.4%, 8.9% and 30.8%, respectively, in the last four quarters.