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NiSource (NI) Tops Q1 Earnings, Lags Revenues, Keeps View

NiSource Inc. NI reported first-quarter 2016 operating earnings of 60 cents per share, surpassing the Zacks Consensus Estimate of 58 cents by 3.4%. Earnings also increased 5.3% year over year.

The company reported GAAP earnings of 56 cents per share compared with 61 cents per share in the year-ago period. The difference between GAAP and operating earnings was due to a 4 cent impact of one-time non-recurring items.

Revenues

In the first quarter of 2016, NiSource’s gross revenues of $1,453.8 million lagged the Zacks Consensus Estimate of $2,040 million by 28.8%.

On a year-over-year basis, revenues decreased 20.6% primarily due to lower contribution from the Gas Distribution, Electric and Gas Transportation segments.

Quarterly Highlights

NiSource’s Gas Distribution sales decreased 0.3% year over year to 365.4 MMDth. The company’s sales from Electric Operations also declined nearly 3.3% to 4,199.3 gigawatt hours

Cost of sales decreased 41.5% year over year to $496.5 million.

Total operating expenses were $558.6 million, down 9.6% year over year primarily due to lower operation and maintenance expenses.

Interest expenses were $90.5 million, down marginally from the year-ago figure.

Financial Position

As of Mar 31, 2016, NiSource’s cash and cash equivalents were $23.7 million compared with $15.5 million as of Dec 31, 2015.

In the first quarter of 2016, net cash from operating activities (continuing operation) was $302.9 million compared with $604.4 million in the year-ago period.

NiSource’s capital expenditure in the first quarter of 2016 was $301 million compared with $243.5 million in the year-ago period.

Guidance

NiSource reiterated the 2016 earnings guidance of $1.00 to $1.10 per share.

NiSource expects to invest nearly $1.4 billion in 2016 to strengthen and modernize its existing infrastructure in all seven states of operation.

Peer Releases

American Electric Power Co., Inc. AEP reported first-quarter 2016 operating earnings of $1.02 per share, missing the Zacks Consensus Estimate of $1.06 by 3.8%.

DTE Energy Company DTE reported first-quarter 2016 operating earnings per share of $1.52, in line with the Zacks Consensus Estimate.

FirstEnergy Corporation FE announced first-quarter 2016 operating earnings of 80 cents per share, outpacing the Zacks Consensus Estimate of 76 cents by 5.3%.

Our View

NiSource’s earnings per share in the first quarter of 2016 surpassed expectations. Earnings benefited from contributions from its regulated operations. The company continued to add customers in both its Gas Distribution and Electric Operations in the reported quarter, which will continue to benefit results in the future.

We believe NiSource’s long-term plan to invest nearly $30 billion in improving its regulated utility infrastructure will boost returns to meet its long-term earnings goal and increase the dividend rate by 4-6% annually.

NiSource currently has a Zacks Rank #2 (Buy).

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