NiSource Inc. (NI) Bundle
Understanding NiSource Inc. (NI) Revenue Streams
Understanding NiSource Inc.’s Revenue Streams
NiSource Inc. generates revenue primarily through its two main segments: Columbia Operations and NIPSCO Operations, which encompass gas distribution and electric generation services.
Breakdown of Primary Revenue Sources
-
Gas Distribution
- Residential: $1,257.2 million
- Commercial: $395.6 million
- Industrial: $105.1 million
- Off-system: $30.5 million
- Wholesale: $1.1 million
- Miscellaneous: $15.4 million
-
Electric Generation and Power Delivery
- Residential: $498.6 million
- Commercial: $470.0 million
- Industrial: $360.4 million
- Wholesale: $32.4 million
- Public Authority: $6.0 million
- Miscellaneous: $10.6 million
Year-over-Year Revenue Growth Rate
The total operating revenues for the nine months ended September 30, 2024, amounted to $3,867.3 million, compared to $4,083.4 million for the same period in 2023, reflecting a year-over-year decrease of approximately 5.3%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Columbia Operations | $1,864.5 | 48.2% |
| NIPSCO Operations | $2,002.2 | 51.8% |
| Total | $3,866.7 | 100% |
Analysis of Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, the revenue from Columbia Operations decreased compared to the previous year, primarily due to a reduction in residential and commercial gas distribution revenues, which were reported at $1,257.2 million and $395.6 million, respectively. Conversely, NIPSCO Operations saw an increase in electric revenues, with residential electric generation revenues rising to $498.6 million, up from $449.2 million in the prior year.
The overall revenue trends indicate a shift in consumption patterns and operational adjustments within the segments, particularly influenced by regulatory changes and market conditions affecting utility pricing and energy sourcing.
A Deep Dive into NiSource Inc. (NI) Profitability
A Deep Dive into NiSource Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was approximately $1,864.5 million compared to $1,981.5 million for the same period in 2023. This indicates a gross profit margin of about 48.3% for 2024 versus 48.6% in 2023.
Operating Profit Margin: The operating income for the nine months ended September 30, 2024, was $1,038.7 million, resulting in an operating margin of approximately 26.9%. In comparison, for the nine months ended September 30, 2023, the operating income was $932.9 million, leading to a margin of 22.8%.
Net Profit Margin: The net income attributable to common shareholders for the nine months ended September 30, 2024, was $536.5 million, translating to a net profit margin of approximately 13.9%. This is an increase from $476.9 million and a margin of 11.7% for the same period in 2023.
Trends in Profitability Over Time
The profitability metrics show a positive trend with both operating and net profit margins increasing year-over-year. The operating profit margin increased by 4.1% from 2023 to 2024, while the net profit margin rose by 2.2% in the same period. This improvement suggests enhanced operational efficiency and cost management practices over the year.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the average operating margin for the utility sector is around 23%, positioning NiSource Inc. above this benchmark with an operating margin of 26.9%. The net profit margin for the sector averages about 10%, indicating that NiSource Inc. also exceeds this average with its net margin of 13.9%.
Analysis of Operational Efficiency
The total operating expenses for the nine months ended September 30, 2024, were $2,828.6 million, compared to $3,150.5 million for the same period in 2023. This reflects a decrease of $321.9 million, contributing to improved operating income. The breakdown of operating expenses is as follows:
| Expense Type | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Cost of Energy | $755.6 | $1,198.3 | ($442.7) |
| Operation and Maintenance | $1,093.5 | $1,101.9 | ($8.4) |
| Depreciation and Amortization | $765.1 | $650.9 | ($114.2) |
| Total Operating Expenses | $2,828.6 | $3,150.5 | ($321.9) |
The gross margin for the nine months ended September 30, 2024, was calculated at 48.3%, reflecting a slight decrease from 48.6% in 2023. This indicates a stable gross profit despite fluctuations in revenue.
Overall, the analysis of profitability metrics indicates that NiSource Inc. is maintaining a healthy financial position relative to its peers, with a consistent focus on managing costs effectively while enhancing revenues.
Debt vs. Equity: How NiSource Inc. (NI) Finances Its Growth
Debt vs. Equity: How NiSource Inc. Finances Its Growth
As of September 30, 2024, NiSource Inc. reported a total long-term debt of $13,357.5 million, with an estimated fair value of $12,926.5 million. The company’s short-term borrowings were recorded at $257.0 million.
The debt-to-equity ratio stands at approximately 1.36. This ratio is higher than the industry average of around 1.0, indicating a greater reliance on debt financing compared to equity.
Recent Debt Issuances
In 2024, NiSource made significant debt issuances, including:
- On March 14, 2024, the company issued $650.0 million of 5.350% senior unsecured notes maturing in 2034, netting approximately $642.6 million after costs.
- On May 16, 2024, it issued $500.0 million of 6.950% junior subordinated notes maturing in 2054, resulting in net proceeds of about $493.4 million.
- On June 24, 2024, it sold $600.0 million of 5.200% senior unsecured notes maturing in 2029, bringing in approximately $593.7 million post-issuance costs.
Credit Ratings and Refinancing Activity
NiSource maintains a credit rating of Baa2 from Moody's and BBB from S&P, indicating a moderate credit risk. The company has actively engaged in refinancing activities, including the termination and repayment of previous term credit agreements totaling $1.65 billion.
Debt and Equity Financing Balance
To balance its debt and equity funding, NiSource has implemented an At-The-Market (ATM) equity program allowing it to raise up to $900.0 million in common stock. As of September 30, 2024, approximately $297.7 million of equity remained available for issuance.
| Type | Amount (in millions) | Interest Rate | Maturity |
|---|---|---|---|
| Senior Unsecured Notes | $650.0 | 5.350% | 2034 |
| Junior Subordinated Notes | $500.0 | 6.950% | 2054 |
| Senior Unsecured Notes | $600.0 | 5.200% | 2029 |
| Short-Term Borrowings | $257.0 | 4.95% - 5.65% | Less than 1 year |
This structured approach to financing, with a mix of debt issuances and equity programs, positions NiSource for continued operational funding and growth in 2024 and beyond.
Assessing NiSource Inc. (NI) Liquidity
Assessing NiSource Inc. Liquidity
Current Ratio: As of September 30, 2024, NiSource reported a current ratio of 1.14, indicating that current assets exceed current liabilities.
Quick Ratio: The quick ratio as of the same date was 0.93, suggesting that the company has a reasonable ability to cover short-term obligations without relying on inventory.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was $1,535.8 million, reflecting a decrease from $1,893.4 million at December 31, 2023. This decline indicates tighter liquidity conditions.
| Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Assets | $4,607.0 million | $5,001.0 million |
| Current Liabilities | $4,071.2 million | $3,107.6 million |
| Working Capital | $1,535.8 million | $1,893.4 million |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash flows from operating activities totaled $1,241.7 million, a decrease from $1,535.9 million in the same period of 2023.
Investing Cash Flow: Cash used in investing activities was $(2,414.5 million) for the same period, compared to $(2,503.3 million) in 2023, indicating slightly reduced capital expenditure.
Financing Cash Flow: Cash flows from financing activities were $(949.5 million), a significant decline from $998.6 million in the prior year, primarily due to repayments of debt and redemptions of preferred stock.
| Cash Flow Activity | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|
| Operating Activities | $1,241.7 million | $1,535.9 million |
| Investing Activities | $(2,414.5 million) | $(2,503.3 million) |
| Financing Activities | $(949.5 million) | $998.6 million |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $158.8 million in cash and cash equivalents, a decrease from $2,281.1 million at the beginning of the period. This indicates a potential liquidity concern, as the cash reserves have significantly diminished.
Moreover, the company has a commercial paper program of $1.85 billion and had $257.0 million outstanding as of September 30, 2024, suggesting access to short-term financing options.
Overall, while NiSource exhibits a reasonable current ratio and access to financing, the declining working capital and cash reserves necessitate careful monitoring of liquidity moving forward.
Is NiSource Inc. (NI) Overvalued or Undervalued?
Valuation Analysis
To determine whether NiSource Inc. (NI) is overvalued or undervalued, we will analyze several key financial metrics, including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for NiSource Inc. is 29.57, calculated using the trailing twelve months earnings per share (EPS) of $1.15 as of September 30, 2024.
Price-to-Book (P/B) Ratio
NiSource's P/B ratio stands at 1.86. This is based on a book value per share of approximately $18.35.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value of NiSource is estimated at $19.78 billion with an EBITDA of $1.87 billion, resulting in an EV/EBITDA ratio of 10.56.
Stock Price Trends
Over the last 12 months, NiSource's stock price has fluctuated between a low of $22.00 and a high of $34.32. As of the latest data, the stock is trading at approximately $33.72.
Dividend Yield and Payout Ratios
NiSource has a dividend yield of 3.15%, with an annual dividend payout of $1.06 per share. The payout ratio is approximately 92.17%, indicating a high proportion of earnings is distributed as dividends.
Analyst Consensus on Stock Valuation
According to recent analyst ratings, the consensus for NiSource is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
Summary of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 29.57 |
| P/B Ratio | 1.86 |
| EV/EBITDA Ratio | 10.56 |
| Stock Price (Current) | $33.72 |
| 52-Week Low | $22.00 |
| 52-Week High | $34.32 |
| Dividend Yield | 3.15% |
| Dividend Payout Ratio | 92.17% |
| Analyst Consensus (Buy/Hold/Sell) | 5/3/1 |
Key Risks Facing NiSource Inc. (NI)
Key Risks Facing NiSource Inc. (NI)
Overview of Internal and External Risks:
NiSource Inc. faces various internal and external risks that can impact its financial health, including:
- Industry Competition: The company operates in a highly competitive environment, with numerous utility companies vying for market share.
- Regulatory Changes: Changes in regulations, including environmental laws and utility rates, can significantly affect operations and profitability.
- Market Conditions: Volatile energy prices and fluctuations in demand can impact revenue streams and operational costs.
Operational Risks:
Recent earnings reports highlight several operational risks:
- Infrastructure Investment: The company is engaged in substantial capital investment projects totaling $3.3 billion to $3.5 billion in 2024, aimed at upgrading infrastructure and enhancing reliability.
- Cost Management: Operating expenses showed an increase of $108.8 million year-over-year due to higher maintenance and depreciation costs.
Financial Risks:
The company has reported significant financial risks, including:
- Long-Term Debt: As of September 30, 2024, NiSource had long-term debt of $15.4 billion, with an interest expense of $380.2 million for the nine months ended September 30, 2024.
- Cash Flow Variability: Cash from operating activities decreased by $294.2 million compared to the previous year.
Strategic Risks:
Strategic risks noted in recent filings include:
- Investment in Renewable Energy: The company is focusing on transitioning to low or zero-emission generation, which requires ongoing investments and may involve uncertainty regarding regulatory approvals and market acceptance.
- Customer Demand Shifts: Changes in consumer preferences and the increasing adoption of distributed energy resources (DERs) could impact traditional utility revenue models.
Mitigation Strategies:
To address these risks, NiSource has implemented several mitigation strategies:
- Regulatory Engagement: Actively engaging with regulatory bodies to ensure compliance and to influence favorable regulatory outcomes.
- Investment in Technology: Upgrading technology to enhance operational efficiency and reduce costs, which is part of the capital investment plan.
- Diversity in Energy Sources: Expanding the energy portfolio to include renewable sources to mitigate reliance on fossil fuels and to adapt to changing regulations.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Intense competition from other utility providers | Pressure on pricing and margins |
| Regulatory Changes | Changes in laws affecting utility rates and operations | Potential increases in compliance costs |
| Market Conditions | Volatility in energy prices | Impact on revenue stability |
| Long-Term Debt | Total long-term debt of $15.4 billion | Higher interest expenses affecting net income |
| Cash Flow Variability | Decrease in cash from operating activities by $294.2 million | Reduced liquidity for operations and investments |
These risk factors are crucial for investors to consider when evaluating the financial health and future prospects of NiSource Inc.
Future Growth Prospects for NiSource Inc. (NI)
Growth Opportunities
Future growth prospects for NiSource Inc. are driven by several key factors including regulatory initiatives, capital investments, and an evolving energy landscape.
Analysis of Key Growth Drivers
NiSource is actively pursuing a range of strategic initiatives aimed at expanding its market presence and enhancing operational efficiency. Significant capital investments are planned, with total capital expenditures projected to be between $3.3 billion and $3.5 billion in 2024, and approximately $19.3 billion earmarked for the period from 2025 to 2029.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, NiSource reported operating revenues of $2.365 billion, a decrease of $116.5 million compared to the same period in 2023. However, net income for the same period increased to $600.4 million from $482.5 million year-over-year. Analysts estimate that the company's earnings per share (EPS) could reach $1.15 for 2024.
Strategic Initiatives or Partnerships
NiSource has entered into an At-the-Market (ATM) equity program allowing for the issuance of up to $900 million in common stock through December 2025. Furthermore, the company completed the NIPSCO Minority Interest Transaction, providing a capital influx of $2.16 billion, which has been strategically utilized to reduce debt and fund ongoing projects.
Competitive Advantages
NiSource's competitive edge lies in its robust regulatory framework, which allows for the recovery of capital expenditures through rates charged to customers. The company has implemented several regulatory capital programs aimed at modernizing infrastructure, with investments totaling $180.1 million in Pennsylvania and $753.5 million in Ohio. Additionally, NiSource's focus on transitioning to cleaner energy sources positions it favorably in a market increasingly driven by sustainability concerns.
| Investment Type | Amount (in millions) | Investment Period | Filing Date |
|---|---|---|---|
| Columbia of Pennsylvania DSIC | $180.1 | Q4 2024 | 9/20/2024 |
| Columbia of Ohio IRP | $753.5 | 2024 | 2/26/2024 |
| NIPSCO - Gas | $161.9 | September 2024 | 10/25/2023 |
| NIPSCO - Electric | $291.8 | August 2023 | 9/19/2022 |
As NiSource continues to adapt to market changes and regulatory requirements, its ongoing investments in infrastructure and clean energy projects are expected to yield substantial growth opportunities in the coming years.
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Article updated on 8 Nov 2024
Resources:
- NiSource Inc. (NI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NiSource Inc. (NI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View NiSource Inc. (NI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.