Xcel Energy Inc. (XEL) came up with its fourth quarter and full-year 2010 earnings results on January 27, 2011. The company’s full-year results comfortably reached the higher end of its guidance range helped by improved electric margins. Though the company’s results missed analyst expectations for both the periods, the company continued providing a high level of customer satisfaction and successfully met or exceeded its energy efficiency and conservation program targets. The company also continued to progress on various projects and programs which should help the company achieve its long-term earnings goals.
Analysts’ sentiments on future earnings remain stable as the company is expected to perform smoothly to reach its project goals going forward.
Turning to Recent Results
Electricity and natural gas company Xcel Energy announced fourth quarter 2010 operating earnings of 29 cents per share versus 37 cents per share in the year-ago quarter, reflecting a decline of 27.6%. The results of the company were lower than the Zacks Consensus Estimate of 31 cents per share.
Xcel’s operating earnings of 2010 were $1.62 per share compared with $1.50 per share reported in 2009. The results again lagged the Zacks Consensus Estimate by 2 cents.
Xcel Energy’s total revenue for fourth-quarter 2010 was $2.56 billion versus $2.61 billion reported in the year-ago period, reflecting a decline of 2.0%. The year-over-year decline in revenue was due to lower contribution from Natural Gas and Others. Reported quarter revenue surpassed the Zacks Consensus Estimate of $2.52 billion.
Xcel Energy’s total revenue for 2010 was $10.3 billion versus $9.6 billion reported in the prior fiscal year, reflecting a growth of 6.9%. Despite a 4.5% year-over-year decline in Natural Gas contribution, the growth in total revenue was attributable to higher contribution from Electric and Other segment. Fiscal year 2010 revenue of the company surpassed the Zacks Consensus Estimate of $10.2 billion.
We have discussed the quarterly results at length here: Xcel Misses EPS, Beats Sales
Agreement
Following the year-end 2010 earnings release, the estimate revisions of analysts remain largely stable. In the last 7 days, only one (out of 13) analyst has slashed its earnings estimates for fiscal 2010, while none of the analysts raised their 2010 estimates. Estimate revisions for 2011 also followed the same trend as 2010.
Annual estimate revisions, over the last 30-day period, also revealed the same trend as the 7-day period, with only one analyst each lowering its estimate for both 2010 and 2011. There were no upside revisions in the 30-day period as well.
Magnitude
Despite one analyst cutting estimates for 2010 and 2011 over the 7-day and 30-day periods, annual estimates for both 2010 and 2011 remained unchanged at $1.73 and $1.84, respectively.
Long-term Neutral
Xcel Energy offers a comprehensive portfolio of energy-related products and services operating in 8 Western and Midwestern states. The company’s diversified portfolio of operations helps to hedge the specific risks emanating from any one state’s regulatory environment and economy.
Looking ahead, we expect Xcel to grow its earnings, driven by its diverse operations, ability to achieve constructive rate case outcomes and visibility for future rate-base growth. On the recent conference call, Xcel Energy reaffirmed its 2011 ongoing earnings guidance of $1.65 to $1.75 per share.
Xcel Energy has shown tremendous progress on its growth projects along with maintaining its position as an environmental leader. During 2010, the company completed the acquisition of two natural gas power plants in Colorado, commenced commercial operation at the Comanche Unit 3 and Nobles wind farm, began construction on the CapX2020 transmission project and received commission approval for its Clean Air Clean Jobs plan, which is designed to reduce emissions in Colorado by at least 70% to 80%.
In addition to operational goals Xcel Energy continues to successfully meet its financial objectives as well. Recently, the company raised its annual dividend by 3 cents to $1.01 per share, representing a 30% growth. The company also saw its credit ratings improve as S&P raised its rating on Xcel Energy and three of its operating companies by one notch.
Minneapolis, Minnesota-based Xcel Energy is a holding company, with subsidiaries engaged primarily in the utility business. Through its four regulated utility subsidiaries the company serves 3.4 million electricity customers and 1.9 million natural gas customers. The company mainly competes with Consolidated Edison (ED) and Ameren Corp. (AEE).
We believe Xcel’s favorable geographic, regulatory, environmental and financial position bodes well for the company. However, we believe these positives have already been reflected in our current target price, leaving little room for further upside in the near term.
Xcel Energy currently retains a Zacks #4 Rank (short-term Sell rating). However, we maintain our long-tern Neutral rating on the stock.
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