Before the bell, Entergy Corporation (ETR) reported its fourth quarter and fiscal 2011 results. In the reported quarter, the company reported operational EPS of 94 cents, falling short of the Zacks Consensus Estimate of 96 cents. Earnings also came lower than the year-ago quarter’s $1.30.
Earnings in the reported quarter were lower than the year-ago period by 36 cents. However utility EPS was 33 cents higher due to lower income tax expense.
Earnings also rose at Entergy Wholesale Commodities by 10 cents primarily due to a lower effective income tax rate and lower decommissioning expense. This was partially offset by the absence of a 2010 gain on a sale of a plant and lower net revenue.
However, all these positives were more than offset by Parent & Other where segmental loss rose 79 cents year over year due primarily to higher income tax expense.
On a reported basis, including one-time items, earnings came in at 87 cents for the reported quarter compared with $1.26 in the year-ago quarter.
Fiscal 2011 operational earnings came in at $7.62 per share, beating the Zacks Consensus Estimate of $7.43 and fiscal 2010 earnings of $7.10 per share.
On a reported basis earnings for fiscal 2011 came in at $7.55 per share versus $6.66 in fiscal 2010.
Operational Results
Revenue in the reported quarter fell 1.7% year over year to $2.5 billion, falling short of the Zacks Consensus Estimate of $2.8 billion. Of this Electricity revenue was down 1.0% to $1.9 billion, Natural Gas was down 8.9% to $39.4 billion, while Competitive Businesses were down 3.5% to $587.7 billion. On an operational basis earnings were $167.2 million compared with $235.0 million in the year-ago quarter; while on a reported basis Entergy’s earnings came in at $154.1 million compared with $228.3 million in the year-ago quarter.
Fiscal 2011 revenue was $11.2 billion versus the Zacks Consensus Estimate of $11.5 billion. Full year revenue also came below $11.5 billion generated a year ago.
Segment Results
Utility
Utility’s quarterly earnings, both as-reported and operational, were $169.7 million in the fourth quarter 2011, compared with $114.3 million on the same bases in the fourth quarter 2010. The increase in earnings was largely due to lower income tax expense. Weather was mild in the current quarter compared to cooler-than-normal weather last year. The negative weather effect was essentially offset by other price and volume variances.
Entergy Wholesale Commodities
Entergy Wholesale Commodities’ earnings were $171.0 million on both as-reported and operational bases in fourth quarter 2011 compared with as-reported earnings of $149.9 million and operational earnings of $156.7 million in fourth quarter 2010.
The quarter-over-quarter increase in operational earnings was driven by a lower effective income tax rate. Also contributing to the higher results was a reduction in the decommissioning liability. This was partially offset by the absence of the gain on the sale of Entergy Wholesale Commodities’ remaining ownership interest in the Harrison County power plant on December 31, 2010, and lower net revenue.
Parent & Other
Parent & Other reported a loss of $186.5 million on an as-reported basis and $173.5 million on an operational basis in the fourth quarter 2011. This compares to a loss of $35.9 million on both as-reported and operational bases in fourth quarter 2010. The wider loss was due primarily to an increase in income tax expense, driven partially by income tax reserve adjustments.
Financial Condition
Entergy in fiscal 2011 generated $3.1 billion from operating activities compared with $3.9 billion in fiscal 2010. Cash and cash equivalents at the end of the reported period were $694.4 million versus $1.3 billion at fiscal-end 2010. Long-term debt increased to $10.0 billion compared with slightly above $11.3 billion at fiscal-end 2010.
Guidance
Entergy affirmed its fiscal 2012 earnings guidance in the range of $5.40-$6.20 per share on an operational basis.
New Orleans-based Entergy Corp. is primarily engaged in electric power production and retail distribution of power. With 30,000MW of generating capacity, it distributes electricity to 2.8 million customers in Arkansas, Louisiana, Mississippi and Texas.
In the near term, we retain our long-term Neutral stance on Entergy in the absence of any positive triggers, which is supported by a Zacks #3 Rank (short-term Hold recommendation) for the stock. The near-term cautious stance is shared by its peers like American Electric Power Company Inc. (AEP) and Public Service Enterprise Group (PEG) also.
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