NiSource Inc. misses Q4 expectations, pledges more infrastructure spending

By Hannah Levitt

NiSource Inc.’s profit in the final three months of 2016 missed Wall Street’s expectations, but the natural gas and electric utility company said it would spend more on utility investments such as pipe and underground electric cable replacements in 2017.

The Merrillville, Indiana-based company said net income in the fourth quarter rose 49 percent to $88.8 million, or 27 cents per diluted share, compared with $59.4 million, or 19 cents per diluted share in the year-ago period.

Adjusting for certain items, the company reported earnings per share of 33 cents, a penny below the analysts’ consensus estimate of 34 cents, according to Yahoo.

Gross revenue rose 16 percent to $1.3 billion in the quarter from $1.1 billion a year ago.

Morningstar analyst Charles Fishman said that the lower-than-expected earnings results were due to a variety of factors including the impact of greater depreciation of assets.

NiSource Net Income
NiSource reported a 15.7 percent increase in total net income in 2016. (Hannah Levitt/MEDILL)

As part of Wednesday’s earnings release, the company increased its 2017 estimated spending on infrastructure replacement to $1.6 billion to $1.7 billion, from previously estimated $1.5 billion.

“Higher investments drive earnings growth and dividend increases if regulation is constructive,” Fishman said in a research note. “We believe NiSource’s overall regulatory frameworks are constructive for investors and likely to stay that way.”

NiSource invested $1.5 billion in gas and electric utilities in 2016, including 406 miles of pipeline replacement. This is part of a long-term strategy to invest $30 billion in utility infrastructure over the next 20 years.

“These utility investments enhanced the safety, reliability and environmental performance of our system, as well as customer service and employee training, all of which supported earnings and dividend growth for our investors,” NiSource CEO Joseph Hamrock said in a press release.

Hamrock reaffirmed NiSource’s $1.12 to $1.18 earnings per share guidance for 2017 on the company’s earnings conference call with analysts.

Chief Financial Officer Donald Brown said on the conference call that NiSource would see minimal impact on earnings and cash flow in the event of federal tax reform under the Trump administration.

For the full year, NiSource reported a 65 percent increase in net income from continuing operations of $328.1 million, or $1.01 per diluted share, from $198.6 million, or 63 cents per diluted share in 2015. Revenue in 2016 rose 3.1 percent to $3.1 billion from $3 billion in 2015.

NiSource stock closed at $23.17 per share Wednesday, slightly higher than its opening price of $23.04 per share.

Photo at top: NiSource provides electric services to over 500,000 customers in Northern Indiana and natural gas to over 3.4 million customers in seven states. (Hannah Levitt/MEDILL)