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Jefferies Downgrades NiSource to an ‘Underperform’

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Jul. 28 2016, Updated 11:05 a.m. ET

NiSource’s price targets

According to Wall Street analysts’ estimates, NiSource (NI) has a one-year median price target of $22.65 compared to its current market price of $26. This amounts to a possible downside of 13% over the next year.

Of the 14 analysts tracking NiSource, nine have recommended it as a “hold,” and three have recommended it as a “buy.” Two analysts have recommended it as a “sell” as of July 26, 2016.

Jefferies downgraded NiSource from a “hold” to an “underperform” on July 25, 2016, based on its towering valuations. It has given the stock a price target of $22.

The chart above shows broker recommendations for NiSource over the next year.

Among NiSource’s utility peers, CenterPoint Energy (CNP) has a flat movement forecast for the next year. It has a price target of $24.55. Currently, it’s trading at $24.50.

Eversource Energy (ES) has a possible price target of $60.73. It’s currently trading at $59. This implies an upside of 3% over the next year.

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NiSource’s outlook

NiSource is targeting an average annual earnings growth rate of 4%–6% for the next several years. Its dividend distributions are expected to follow its earnings growth. NiSource’s earnings growth is likely to be driven by its capital investments, which will ultimately improve its rate base.

Though its earnings growth has nearly halved due to its pipeline business spin-off, NiSource could see its earnings stabilize in the near future. On the other hand, CenterPoint Energy is one of the worst performing utilities due to its exposure to Enable Midstream Partners (ENBL).

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