Monday, Barclays (LON:BARC) adjusted its outlook on NiSource Inc (NYSE:NI), raising the price target to $34 from $31, while maintaining an Overweight rating on the utility company's shares. The increase reflects a positive shift in the growth forecast for NiSource's service territory in Indiana, driven by expected large-scale energy demands from data centers.
The NiSource subsidiary, Northern Indiana Public Service Company (NIPSCO), filed its 2024 Integrated Resource Plan (IRP) with the Indiana regulator in late June. The filing suggests significant upcoming loads primarily due to data centers, which could materially alter the growth trajectory for the area. This development is anticipated to lead to earnings per share (EPS) revisions, considering the potential scale of capital deployment, even after accounting for financing.
Analysts project that the new gas infrastructure required to meet this demand could add between $0.03 to $0.10 to NiSource's EPS by 2028. The company is expected to continue its beat-and-raise pattern before this new growth data is factored in. The increased price target of $34 also stems from a higher premium multiple now attributed to NiSource's stock, which is currently trading at a modest 5% price-to-earnings (P/E) premium compared to other electric utilities and aligns with gas utilities.
The adjustment in NiSource's stock valuation is based on a blended sum-of-the-parts (SOTP) approach, taking into account the anticipated EPS accretion from the infrastructure expansion. The company's shares are poised for a stronger valuation multiple due to the optimistic growth outlook presented by the new energy demands in its Indiana service territory.
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