Diversified energy holding company Integrys Energy Group Inc. (TEG) reported adjusted earnings of $1.01 per share compared with 82 cents per share in the year-ago quarter. The increase in earnings was driven by execution of new business strategies, higher electric rate and fuel window impacts at the Wisconsin Public Service. The earnings surpassed the Zacks Consensus Estimate of 97 cents.
Company’s GAAP earnings were 49 cents in the reported quarter compared with 91 cents in fourth quarter 2010.
In fiscal 2011,Integrys Energy’s adjusted earnings were $3.38 per share versus $3.13 per share in 2010. The earnings beat the Zacks Consensus Estimate of $3.36 per share.
The company also reported yearly GAAP earnings of $2.87 per share, slightly higher than the year-ago figure of $2.83 per share. The difference between annual GAAP and adjusted earnings was the result of a non-cash cost of 45 cents involved in derivative and inventory accounting activities at Integrys Energy Services, 5 cents tax cost related to Michigan Law change, an impairment cost of 4 cents related to property, plant, and equipment, 1 cent loss from discontinued operations, 1 cent cost associated with restructuring, and 5 cents of tax benefit due to health care reform legislation.
Total Revenue
Integrys Energy’s total quarterly revenue of $1,132.1 million was down from $1,287.1 million in the prior-year quarter and also missed the Zacks Consensus Estimate of $1,738.0 million.
Utility segment revenue was $858.8 million in the reported quarter versus $902.5 million in the year-ago period. This was due to a dip in sales from the Natural Gas Utility segment as a result of mild weather; partially offset by better performance from the Electric Utility segment related to electric rate increase. Non-regulated revenue in the reported quarter was $273.3 million versus $384.6 million in the year-ago quarter.
In the fiscal 2011, the company reported total revenue of $4,708.7 million compared with the prior-year value of $5,203.2 million.
Operating Results
Integrys Energy’s retail electric sales volume in the fourth quarter was 2,962.4 kilowatt-hours (“Kwh”) versus 2,931.3 Kwh in the comparable year-ago period. Quarterly natural gas sales volume was 34.8 billion cubic feet (“Bcf”) compared with 37.5 Bcf in the year-ago quarter. Wholesale electric sales volume in the fourth quarter was 81.9 Kwh versus 200.2 Kwh in fourth quarter 2010, resulting in lower heating degree days.
In the reported quarter, Integrys Energy’s fuel, natural gas and power costs decreased by 8.1% to $423.7 million from $461.0 million in year-ago quarter. Operating and maintenance costs also dipped 6.6% from $281.0 million reported in fourth quarter 2010. Operating income decreased to $61.8 million from $133.3 million in the year-ago quarter with a decline in total revenue, offset by cost control.
Financial Update
Cash and cash equivalents of Integrys Energy as of December 31, 2011 were $28.1 million, down from $179.0 million as of December 31, 2010. Long-term debt decreased to $1,872.0 million from $2,161.6 million as of December 31, 2010.
Net cash generated from operating activities for the twelve months of 2011 was $721.9 million, down from $725.2 million in the corresponding period last year. Capital expenditure for the twelve-month period totaled $311.4 million, compared with $258.8 million in the year-ago period.
Guidance for 2012
Integrys Energy Group expects 2012 GAAP earnings to be in the range of $3.35 – $3.55 per share; reflecting normal weather conditions in current fiscal, operational improvement assumptions and availability of generation units.
Peer Comparison
Integrys Energy Group’s peer CMS Energy Corporation (CMS) announced adjusted earnings of 15 cents per share for the fourth quarter 2011, in line with the Zacks Consensus Estimate.
CMS Energy’s operating revenue in the reported quarter under review grossed $1.62 billion, down 3.7% year over year. The results were also lower than the Zacks Consensus Estimate by $405.0 million.
Based in Chicago, Illinois, Integrys Energy Group is a diversified holding company providing products and services in both regulated and non-regulated energy markets, through its subsidiaries. Integrys Energy Group Inc. currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.
