Analysts are expecting NiSource (NI) to report earnings per share (or EPS) of $0.07 in 2Q16. In the same quarter last year, it posted EPS of $0.18. NiSource’s management has given earnings guidance in the range of $1–$1.10 per share for 2016.
The company estimates its long-term earnings growth to stay near the 4%–6% range, in line with the industry. Prior to the separation of its pipeline business, NiSource’s earnings growth was nearly 8%–10%.
Factors that could impact earnings
NiSource’s pipeline business was contributing nearly 40% of its consolidated earnings prior to the spin-off of its pipeline business. After the spin-off, NiSource generated nearly 65% of its earnings from its gas distribution operations and the rest from its electric operations in Indiana.
NiSource’s earnings have been recently positively influenced by rate increases. Its EPS have risen by more than 5% year-over-year, apart from its pipeline segment, which was spun off in 2Q15. NiSource’s electric operations have improved due to lower operating expenses during the quarter.
Return on equity
NiSource’s adjusted financial return on equity has stayed near 6%, much lower than the industry average of near 10%. This lower return on equity is largely due to the goodwill associated with NI’s acquisition of Columbia Gas.
NiSource is one of the beneficiaries of the healthy regulatory policies in Pennsylvania. It earns authorized returns on equity due to its fast recovery of investment, as rate requests in Pennsylvania are based on forward test years.