NI — NiSource Inc

The tape and the Street are pointing opposite directions, which nets out to Neutral. Price action is unambiguously weak: as of 2026-09-13, NI is -12.29% over three months and -12.62% over six months, with RSI at 42.31 and the shares 5.21% below the 50-day and 8.03% below the 200-day average. But the fundamental news flow has been constructive — Q2 2026 (reported 2026-08-05) delivered adjusted EPS of $0.16 in line with consensus, revenue of $1.34B beat the $1.15B estimate, and management reaffirmed FY2026 adjusted EPS of $2.02-$2.07 plus the $28.6B 2026-2030 capex framework. The analyst community is firmly positive (16 buy / 6 hold / 0 sell, consensus target $50.71, ~22% above price), and late-summer 13F filings showed BlackRock disclosing a $2.6B / ~11.46% position. The board also declared a $0.30 quarterly dividend on 2026-09-10, an annualized ~2.9% yield. Net: negative price, positive fundamentals — a de-rating driven by the 30-year Treasury near 5.24%, not by the business.

Revenue is a steady, unspectacular grower, and the seasonality is textbook (Q1 winter heating peak, Q2/Q3 trough). Every comparable quarter is up: Q2 2026 revenue of $1,342M vs $1,283M in Q2 2025 (+4.6%) and $1,085M in Q2 2024 (+23.7% over two years); Q1 2026 of $2,363M vs $2,183M (+8.3%) and $1,706M (+38.5% over two years); Q4 2025 of $1,903M vs $1,588M (+19.8%) and $1,422M (+33.8%). That is consistent mid-single-digit-plus top-line compounding from rate increases, rider recovery and customer growth — no sign of deceleration at the revenue line. Margins are the nuance. Q1 operating margin is rock-stable (34.7% in Q1 2026 vs 34.8% in Q1 2025, 34.2% in Q1 2024), Q4 is stable-to-improving (27.1% in Q4 2025 vs 26.2% in Q4 2024 vs 25.5% in Q4 2023), but Q2 2026 compressed hard to 17.0% from 20.5% a year earlier — GAAP operating income fell 13.2% on 4.6% higher revenue, and GAAP net income fell 55% to $45.5M, taking diluted EPS to $0.09 from $0.22. Critically, adjusted EPS was $0.16 and in line with consensus with guidance reaffirmed, so this looks like a one-quarter, non-recurring item rather than a structural margin break. Trailing-twelve-month diluted EPS sums to $1.887 versus $1.95 for full-year 2025, i.e. roughly flat, with the FY2026 guide of $2.02-$2.07 implying a return to ~5-8% growth. Cash flow is the genuine structural feature: free cash flow was negative in 11 of the last 12 quarters (only Q1 2025 was positive at +$49.1M), and Q2 2026 FCF was -$417M on $1,097M of capex. That is not distress — it is what a $28.6B regulated capex program looks like before it converts to rate base — but it does mean the dividend and the build are funded by debt and equity issuance rather than internally generated cash.

Not cheap, and modestly expensive against its own history. As of 2026-09-13, NI trades at $41.42 on TTM EPS of $1.887, a 21.8x trailing P/E versus a five-year average of 19.18x — roughly a 14% premium. On the next-FY EPS estimate of $2.054, the forward P/E is 20.2x, and on my FY2027 estimate of $2.23 it is 18.6x. Price-to-sales is 2.886 versus a five-year average of 2.43 (~19% premium), and price-to-book is 2.075. The PEG ratio in the data is unusable (it shows -1.96e15, a division artifact rather than a real signal), so the honest way to frame growth-adjusted value is directly: you are paying ~20x forward for a utility management guides to 9-10% long-term EPS growth but which has delivered roughly flat GAAP EPS over the trailing year. Even crediting the full 9-10% target, 20x forward is a full multiple in a world where the 30-year Treasury is near 5.24% and the shares yield only ~2.9%. The deterministic overlay agrees, labeling the stock 'Rich vs. its own history.' Nothing here is bubble territory — the premium to its own average is well inside the noise of a 50-100bp move in the long bond — but there is no valuation cushion either.

The key insight as of 2026-09-13 is that the market is not discounting earnings that failed to appear — the earnings appeared. Q2 adjusted EPS matched, revenue beat by ~17%, and FY2026 guidance of $2.02-$2.07 was reaffirmed. Yet the stock fell 12% over six months. That gap is entirely a discount-rate story: the multiple compressed from the low-20s toward the high-teens as long rates rose and capital rotated out of bond proxies. The practical playbook follows from that. First, watch the 30-year Treasury more than the EPS print — a stabilization there does more for this stock than a 2-cent beat. Second, treat the 19.18x five-year average trailing P/E as the mean-reversion anchor: applying it to FY2026E gives roughly $39 and to FY2027E roughly $43, so the current $41.42 embeds a partial recovery already. Third, watch the GAAP-versus-adjusted spread. GAAP EPS of $0.09 against adjusted $0.16 in Q2 2026 is a wide gap; if GAAP keeps lagging the adjusted narrative, the market will eventually stop paying for the adjusted number. Conversely, if rates roll over, a utility with a 0.54 beta and a 22% consensus upside is exactly the kind of name that re-rates fastest.

Downtrend that has stopped going down, but no bottom confirmed. As of 2026-09-13, RSI(14) stood at 42.31 — neutral, not oversold, and with no positive divergence. The $41.42 price is essentially flat against the 20-day average (: +0.08%, implying a 20-day level near $41.39), but 5.21% below the 50-day (implied ~$43.70) and 8.03% below the 200-day (implied ~$45.04), which is a classic bearish moving-average stack. Return profiles confirm the stall: +0.05% over one week, -1.38% over one month, -12.29% over three months, -12.62% over six months. Against a 52-week range of $39.30-$49.21, the shares are ~5% off the low and ~16% off the high. Entry-timing implication: there is no urgency to chase here. A weekly close back above the 50-day near $43.70 would be the first genuine trend-change signal; failure to hold the $39.30 low would open the next leg down. Until one of those resolves, this is a scale-in-on-yield setup, not a momentum entry.

• Long-end interest rates: the 30-year Treasury hovering near 5.24% (multi-year highs) is the single dominant driver of the 12.6% six-month drawdown. Utility equity is effectively long-duration; every 50bp move in the long bond moves NI's fair multiple more than any operational item.
• Sector rotation out of bond-proxy defensives: capital has been leaving rate-sensitive names (Utilities Select Sector SPDR under pressure) and NI, with a 0.54 beta, has been swept along regardless of company-specific performance.
• Regulatory outcomes across six jurisdictions (Indiana, Ohio, Pennsylvania, Virginia, Kentucky, Maryland): the entire $28.6B 2026-2030 capex plan is only valuable if state commissions approve cost recovery and maintain authorized ROEs. NIPSCO's Indiana filings and the Columbia Gas state cases are the highest-stakes.
• Capital-markets access and the cost of funding: with debt-to-equity at 1.835, long-term debt at $15.61B against $9.57B of equity, and negative free cash flow in 11 of 12 quarters, NiSource must continuously issue debt and equity. Higher long rates directly raise the marginal cost of funding the build and pressure per-share growth through dilution.
• Load growth and electrification optionality: data-center and industrial demand in NIPSCO's Indiana territory is a genuine multi-year upside driver, but it is a 2028+ story, not a 2026 one, and it cuts against a 2.9% dividend yield for investors who want current income.

• Q3 2026 earnings, tentatively scheduled for 2026-11-03 or 2026-11-04: the first clean read on whether the Q2 GAAP margin and EPS air pocket was genuinely one-off, and whether the $2.02-$2.07 FY2026 adjusted EPS range and the 9-10% long-term growth trajectory hold.
• A peak or reversal in long-term Treasury yields: the most powerful single catalyst for this name. With a 0.54 beta, NI moves less than the market on the way up, but a sector re-rating would lift the multiple off a depressed base.
• Constructive rate case and rider outcomes across the six-state footprint that convert the $28.6B capex backlog into earning rate base at an authorized ROE.
• Continued institutional accumulation — BlackRock's disclosed $2.6B / ~11.46% position is a meaningful signal, and further 13F disclosures or index-related flows would reinforce it.
• Dividend progression: the declared $0.30 quarterly rate annualizes to ~2.9%, and note the FMP-stated yield of 2.656% implies a trailing $1.10 rate — i.e. the dividend has recently been raised roughly 9%, consistent with the EPS growth target. A further raise at the February 2027 declaration would validate the story.
• Any concrete data-center or large-load contract announcement in Indiana, which would be a genuine upside surprise to the current regulated-growth narrative.

• Rates staying high or moving higher: with debt-to-equity at 1.835 and long-term debt of $15.61B versus $9.57B of equity, NiSource is one of the more rate-levered names in the utility space. A 30-year yield that holds above 5.25% keeps the multiple compressed no matter how good the earnings are.
• Structurally negative free cash flow: -$417M in Q2 2026 alone, and negative in 11 of the last 12 quarters. The dividend and the $28.6B capex program are funded with external capital. A credit downgrade, a spike in funding costs, or a closed equity window would force a difficult choice between the build, the dividend, and the balance sheet.
• Regulatory risk concentrated in state commissions: an adverse rate order in any of Indiana, Ohio, Pennsylvania, Virginia, Kentucky or Maryland could impair recovery of spending already incurred.
• Weak balance-sheet liquidity: a current ratio of 0.498 and cash of just $70M against $4.41B of current liabilities leaves no cushion — this is normal utility working-capital management, but it means there is no internal buffer if markets seize.
• Earnings-quality optics: Q2 2026 GAAP EPS of $0.09 versus adjusted $0.16, with GAAP net income down 55% YoY. The company reaffirmed guidance and the adjusted number was in line, but a widening GAAP-to-adjusted gap is the kind of thing that eventually gets repriced.
• Valuation with no cushion: 20.2x forward and 2.89x sales against five-year averages of 19.18x and 2.43x. If growth slips toward the low end, or equity issuance dilutes the per-share math, there is no multiple support to fall back on.

NiSource is a good, boring, fully regulated utility with a credible 6-9% long-term earnings growth engine, a well-supported ~2.9% dividend, a 0.54 beta, and real optionality from grid modernization and Indiana load growth. But at $41.42 as of 2026-09-13 it is not a bargain: it trades at a premium to its own five-year P/E and P/S averages, into a 5.24% 30-year Treasury, with 1.84x debt-to-equity and free cash flow negative in 11 of the last 12 quarters. The 12% six-month decline is a discount-rate story rather than an earnings failure, which is a genuine positive — but it also means the stock's direction from here is a bet on the long bond, not on the company. Near-term risk/reward skews negative: full valuation, a broken technical trend, and an unresolved macro headwind, against a long-term business that is genuinely fine. I would not buy here; I would want either a rate reversal or a price closer to the $39.30 52-week low before the yield starts doing the work.

Two converging methods as of 2026-09-13. Primary (65%): a growth-adjusted justified forward P/E of 19.5x applied to FY2027E EPS of $2.23 — where $2.23 is FY2026 guidance midpoint of $2.045 grown at 9%, the low end of management's 9-10% target to allow for flat trailing GAAP EPS — giving $43.49; the 19.5x anchors on NI's own five-year average P/E of 19.18x plus a small premium for above-median growth, offset by 1.84x debt/equity. Cross-check (35%): a Gordon dividend model using the declared $1.20 annualized dividend, a 6.0% dividend growth rate (below the 9-10% EPS target to reflect equity-issuance dilution and flat trailing GAAP earnings) and an 8.75% required return (10-year Treasury ~4.6% plus a ~415bp equity risk premium, above the CAPM-implied ~7.6% because a 0.54 beta understates the leverage risk of a 1.84x debt/equity balance sheet), giving $1.20 / (0.0875 - 0.060) = $43.64. Blended, my independent intrinsic value is ~$43.50 — roughly 5% above the 2026-09-13 price of $41.42 and well below the $50.71 sell-side consensus, which I believe uses a more generous terminal multiple than the current rate backdrop justifies.