NiSource Q3 2026: EPS up 35% to $0.27, but a $43M Ohio property-tax settlement did much of the work

NiSource, the Indiana-based owner of the NIPSCO electric and gas utility and the Columbia Gas companies in five other states, reported third-quarter 2026 revenue of $1,349.4 million, up 6.0%, and diluted EPS of $0.27, up from $0.20. Rate increases granted by regulators did the steady work. But the quarter's jump in profit came mostly from one place: Columbia's property-tax bill fell $43.0 million, "primarily due to the impact of a settlement with the Ohio Department of Taxation related to tax years 2022 through 2025." That is four years of taxes settled in one quarter, and the company's adjusted EPS of $0.27 does not remove it. Alongside the results, NiSource signed a 788-megawatt data-center contract with Microsoft, narrowed 2026 guidance to the upper half of its range and gave 2027 guidance for the first time.

Q3 2026 results

Operating margin here is the share of revenue left after running the business (fuel, maintenance, depreciation, non-income taxes), before interest and income tax. Q3 is a small quarter for NiSource: gas utilities earn most of their profit in winter, when customers heat their homes, so a few tens of millions of dollars move the percentages a lot.

Takeaway: The core business did not improve as much as a 35% EPS gain suggests. Columbia's operating income more than doubled to $119.2 million, but $43.0 million of that was a property-tax settlement covering 2022 through 2025, which will not repeat. NIPSCO, where the growth story is, earned 4.1% less. The quarter that mattered for the stock was the plan, not the profit: a Microsoft contract, first 2027 guidance of $2.22–$2.30 and a $40.0 billion capital plan for 2027–2033.

Segment results

Columbia Operations (gas distribution in Ohio, Pennsylvania, Virginia, Kentucky and Maryland): revenue rose 3.6% to $505.6 million and operating income rose to $119.2 million from $52.1 million. New rates added $23.6 million of revenue. On costs, "other taxes" fell to $8.4 million from $52.0 million, which is the Ohio settlement, and employee and administrative costs fell $11.3 million. Depreciation rose $13.8 million. Gas cost itself is a pass-through: utilities bill customers what they pay for the gas, so lower cost of energy ($46.5 million vs $58.5 million) lowered revenue by about the same amount without changing profit.

NIPSCO Operations (electric and gas in northern Indiana): revenue rose 6.1% to $835.5 million, but operating income fell to $223.1 million from $232.6 million. New base rates and capital-recovery charges added $28.9 million and higher usage $8.6 million. Against that:

• Depreciation rose $15.1 million, driven by the same new base rates (more plant in service means more depreciation).
• Outside services rose $5.2 million, the Value Captured cost program cost $3.1 million, and materials, property taxes and bad debts added smaller amounts.
• Revenue was reduced $15.5 million by passing tax credits back to customers. This is mostly a wash: the same credits are why the company's effective income-tax rate fell to 8.6% from 16.1%.

The demand picture in Indiana is strong. Industrial electric volume rose 255.4 GWh (+11.8%) and industrial electric revenue rose 15.2% to $180.8 million; commercial sales rose 1.7%. Residential sales fell 1.8% in a summer about as hot as last year's (639 cooling degree days vs 640). Wholesale sales fell 26.7% in volume but wholesale and other revenue rose $18.4 million.

The August storms

On August 11, 2026, NIPSCO's electric system was hit by what the filing calls "an unprecedented severe weather event," followed by more storms over the next days. About 375,000 customers lost power, roughly three quarters of NIPSCO's 496,815 electric customers. Crews replaced about 1,500 poles and five transmission towers. Of the $216.9 million spent in the quarter, $13.2 million was recorded as operating expense, $162.1 million was capitalized as new infrastructure and $41.6 million of damaged assets were retired. For a regulated utility, capitalized storm rebuilding usually ends up in rates. So the storm is a cost to customers more than to shareholders, and it adds to the investment base the company earns on.

What the headline numbers hide

• The property-tax settlement. Columbia's "lower property tax" line was $43.0 million favorable in the quarter, explained as a settlement with Ohio for 2022 through 2025. Take that out and pretax income falls to about $109 million from $127.6 million, a decline of roughly 15%, not a 19% rise. NiSource's adjusted EPS reconciliation only removes weather and Value Captured costs ($6.0 million), so adjusted EPS of $0.27 includes the settlement. By our rough estimate (the $43.0 million taxed at about 21–25%), it is worth roughly $0.07 a share, which would make underlying EPS about $0.20, close to last year's $0.19 adjusted.
• A lower tax rate. The effective tax rate fell to 8.6% from 16.1% because more tax credits are being passed back to customers. Much of that is offset in revenue (the $15.5 million passback at NIPSCO), so it does less for profit than the rate change suggests.
• Non-cash income from construction. "Other, net" rose to $22.3 million from $9.9 million, mainly because AFUDC equity rose to $20.7 million from $8.5 million. AFUDC is an accounting credit utilities book for the return on money tied up in projects still being built; it raises reported profit but brings in no cash until the project enters rates. It is growing as data-center construction ramps.
• Interest is still rising faster than revenue. Net interest expense rose 17.1% to $210.5 million, versus 6.0% for revenue. That is slower than Q2's 43% increase, but long-term debt (carrying value) reached $17.48 billion from $15.48 billion at year-end.
• Cash flow. Operating cash flow in the quarter was about $547 million (nine-month $1,669.5 million less the half-year's $1,122.7 million), far above net income of $139.0 million, which is normal for a utility with $337.8 million of depreciation. But nine-month capital spending was $3,102.5 million, up 60%, and working capital absorbed $221.9 million in nine months versus $26.0 million a year ago, so the gap is being funded with new debt ($1,982.2 million issued in nine months) and stock.
• Shares and dividends. NiSource does not buy back stock; it issues it. Diluted shares rose 1.6% to 481.1 million through its at-the-market program, and in October it settled a forward sale for $99.9 million. Dividends paid were $144.2 million in the quarter ($437.5 million in nine months less $293.3 million in the first half).

On balance the quarter is flattered: a $43.0 million settlement of four years of Ohio property taxes turned what would have been roughly a 15% fall in pretax income into a 19% rise, and adjusted EPS keeps it in.

Did last time's read hold up?

Our Q2 report said reaching 2026 guidance of $2.02–$2.07 "looks plausible," with the main risk being financing and interest costs. It held: management narrowed guidance to the upper half of the range, and nine-month adjusted EPS is $1.49 versus $1.38 a year ago. Interest growth slowed to 17% from Q2's 43%. Part of the Q3 beat, though, came from the property-tax settlement rather than the business, which our Q2 read did not anticipate.

Outlook

Management guidance (October 28, 2026):

• 2026 consolidated adjusted EPS in the upper half of $2.02–$2.07 (narrowed from the full range). With $1.49 earned in nine months, that implies about $0.56–$0.58 in Q4.
• 2027 consolidated adjusted EPS of $2.22–$2.30, the first 2027 guidance.
• Base-plan adjusted EPS growth of 6%–8% a year, extended to 2027–2033, and consolidated adjusted EPS growth (including data-center earnings) raised to 10%–11% a year for 2027–2033.
• $40.0 billion of capital spending over 2027–2033: $32.0 billion in the base plan and $8.0 billion for data centers.

The Microsoft contract. In October NIPSCO agreed to supply a Microsoft data center in its territory, with capacity starting in 2028 and rising to 788 MW from 2031, for 20 years after energization. Microsoft makes an initial capacity payment in 2026 and monthly capacity payments from Q2 2027, with minimum amounts. The contract still needs approval from the Indiana Utility Regulatory Commission (IURC), the state body that sets NIPSCO's rates. Management says its signed agreements with data-center customers, through the GenCo generation subsidiary, should save existing customers about $1.75 billion. Planned spending for existing data-center customers is estimated at $14.0–$14.5 billion, and the new gas-fired plant for the earlier Amazon contract is now expected to start commercial operation in 2030.

Our read: The upper half of 2026 guidance looks safe, since Q4 is a heating-season quarter and adjusted EPS strips out weather swings (weather was $15.7 million below normal over nine months). For 2027, the $2.22–$2.30 range implies about 8%–12% growth on this year's ~$2.06, and the risk is the same one we flagged in Q2: borrowing and depreciation arrive before the matching rates. Three things to watch next quarter: whether Columbia's operating income holds up without the Ohio settlement, whether NIPSCO's industrial volume growth continues, and how much of the $162.1 million of capitalized storm costs regulators allow into rates. The coal plant at R.M. Schahfer, kept open under federal emergency orders through at least December 18, 2026, is another open cost-recovery question.