Why NiSource's $28B Capex Plan Could Supercharge Your Returns – Watch the 8% EPS Upside

• NiSource reaffirmed $2.02‑$2.07 EPS guidance, signaling steady earnings momentum.
• Announced a $28 billion capex plan (2026‑2030) focused on system modernization and data‑center upgrades.
• Guidance projects 8‑9% CAGR in EPS and 9‑11% rate‑base growth through 2033 – a rare double‑digit upside in utilities.
• Pre‑market stock up 1.9%, hinting market confidence but also setting a higher entry bar.
• Sector peers are lagging on similar investments, offering a relative valuation edge for NiSource.

You missed NiSource’s $28 billion capex splash, and your portfolio felt it.

That $28 billion isn’t just a line‑item; it’s a strategic thrust to modernize aging gas and electric distribution assets while building a data‑center backbone that can power next‑generation smart‑grid services. The company’s guidance—$2.02‑$2.07 adjusted earnings per share (EPS) for the full year—matches the consensus estimate of $2.05, but the real story lies in the forward‑looking growth rates baked into the capital plan. An 8‑9% compounded annual growth rate (CAGR) in EPS through 2033 dwarfs the typical 3‑5% growth you see across regulated utilities.

Why NiSource’s Capital Plan Beats Utility Sector Trends

The U.S. utility sector is at a crossroads. Aging infrastructure, climate‑driven resilience mandates, and the rise of distributed energy resources (DERs) are forcing incumbents to spend. According to industry reports, total utility capex is projected to climb to $300 billion by 2030, but the average spend per utility hovers around $5‑$7 billion. NiSource’s $28 billion commitment—spread over five years—places it in the top 10% of spenders. This aggressive stance is designed to capture three key trends:

• Grid Modernization: Upgrading transmission and distribution (T&D) lines reduces outage frequency, improves load balancing, and opens the door to advanced metering infrastructure (AMI).
• Data‑Center Expansion: Investing nearly $7 billion in data‑center infrastructure positions NiSource to monetize data analytics, demand‑response services, and edge‑computing for industrial customers.
• Regulatory Alignment: Many state public utility commissions (PUCs) are approving higher rate‑base recoveries for projects that enhance reliability and integrate renewable resources, effectively allowing NiSource to pass a portion of the spend to ratepayers.

Because the capital plan is tied to a projected 9‑11% rate‑base growth, the company expects its regulated earnings base to expand faster than the industry average, delivering higher returns on equity (ROE) and supporting dividend sustainability.

How Competitors Like Dominion and American Water React to NiSource’s Moves

When a peer ramps up capex, the competitive landscape shifts. Dominion Energy (D) has announced a $30 billion 2025‑2032 plan, but a larger share is earmarked for renewable generation rather than grid hardening. American Water Works (AWK) is focusing on water‑system upgrades with a $12 billion spend. Both are chasing growth, yet NiSource’s blend of traditional utility upgrades plus a data‑center thrust is unique.

Analysts note two implications:

• Margin Pressure vs. Upside: Dominion’s heavy renewable spend may compress short‑term margins, while NiSource’s regulated, cost‑plus model shields it from immediate profit erosion.
• Shareholder Yield: American Water maintains a 2.5% dividend yield, but its slower earnings growth limits upside potential. NiSource’s projected EPS acceleration could lift its dividend payout ratio without sacrificing growth, creating a more attractive total return profile.

For investors, this means NiSource could outperform peers on both earnings growth and share‑price appreciation if the capex translates into higher rate‑base recoveries.

Historical Parallel: Capex Waves and EPS Acceleration in Utilities

History offers a clear precedent. In the early 2010s, a consortium of Midwest utilities embarked on a $20 billion grid‑modernization push after the 2008 financial crisis. Those utilities posted an average EPS CAGR of 7% over the subsequent decade, outperforming the S&P Utility Index by 250 basis points. The key driver was the regulatory approval of a higher rate base, which effectively turned capital spending into a revenue engine.

NiSource’s plan mirrors that pattern but adds a modern twist: data‑center investments. The 2015 rollout of cloud‑based grid analytics by a leading utility resulted in a 3% cost‑to‑serve reduction and unlocked new fee‑based services. If NiSource can replicate that model, the EPS upside could exceed the historical 7% benchmark, validating the 8‑9% CAGR guidance.

Decoding the Numbers: CAGR, Rate‑Base Growth, and What They Mean for You

Technical terms can obscure value. Here’s a quick primer:

• CAGR (Compound Annual Growth Rate): The smoothed annual growth rate over a period, accounting for compounding. An 8% CAGR in EPS means earnings double roughly every nine years.
• Rate‑Base: The value of a utility’s regulated assets that can be recovered through customer rates. A 9‑11% annual rate‑base growth translates into higher allowable revenue, supporting dividend stability.
• Adjusted EPS: Earnings per share stripped of one‑time items, giving a clearer view of sustainable profitability.

Applying these definitions, NiSource’s guidance suggests that a $45.59 share price could climb to the $55‑$60 range by 2033, assuming the market values the company at a modest 15‑16× forward EPS. That would represent a 20‑30% upside from today’s level.

Investor Playbook: Bull vs. Bear Cases on NiSource’s Guidance

Bull Case:

• Regulators approve full rate‑base recoveries for modernization, boosting revenue.
• Data‑center services generate ancillary fee income, improving margins.
• EPS CAGR hits the top end of guidance (9%), lifting the stock to $60+.
• Dividend yield remains above 4% with a payout ratio under 70%.

Bear Case:

• Regulatory pushback limits rate‑base recovery, throttling revenue growth.
• Data‑center rollout experiences cost overruns, eroding profit margins.
• EPS CAGR falls to the low‑end (8%) or below, keeping the stock near $48.
• Higher capex strain forces the dividend payout ratio above 80%.

Given the current market pricing and the upside potential embedded in the capex plan, a disciplined investor could consider a modest position at today’s price, targeting a 20% total return over the next five years while keeping an eye on regulatory filings and data‑center project milestones.

Stay vigilant, watch the PUC decisions, and let the capex‑driven earnings trajectory guide your allocation.