Southern Union Company (SUG) reported third-quarter 2010 adjusted earnings of 40 cents per share, falling behind the Zacks Consensus Estimate of 44 cents by 4 cents. Results were however ahead of adjusted earnings of 34 cents per share in third-quarter 2009. On a reported basis, Southern Union reported EPS of 29 cents compared with 36 cents in the prior year quarter.
Operating Statistics
Revenue of Southern Union in the quarter totaled $487.5 million, up 11.2% from $438.5 million in the prior year period. Results also surpassed the Zacks Consensus Estimate of $460 million.
The improvement was driven by strong performance at all the segments including Transportation and Storage; Gathering and Processing; and Distribution, with revenues rising 5.9%, 13.4%, and 15.1%, respectively, year over year. The company reported net earnings of $36.6 million compared with $44.7 million in the prior year quarter.
Segment Update
Transportation and Storage: In the reported quarter earnings were $112.1 million, compared with $97.4 million in the prior year quarter. The increase was primarily attributable to higher revenues from its Trunkline LNG plant. Revenue from the plant rose year over year backed by the LNG infrastructure enhancement construction project operational since March 2010. This was offset partially by lower revenues from interruptible parking and short-term firm transportation services.
Gathering and Processing: In the reported quarter earnings were $10.2 million, compared with $8.2 million in the prior year quarter. The increase is primarily due to higher realized prices from both natural gas and natural gas liquids sold. In the reported quarter total daily processed volumes were 444,316 MMBtu compared with 357,182 MMBtu in the year-ago period.
Equity volumes, which the company primarily receives through its percentage of proceeds contracts with producers, daily averaged 36,000 MMBtu of natural gas liquids equivalents and 21,000 MMBtu of natural gas.
Distribution: In the reported quarter earnings were $6.3 million compared to $5.1 million in the prior year quarter. The increase was largely due to higher gas rates at Missouri that came into effect on February 28, 2010. This was partially offset by higher operating, maintenance and general expenses.
Financial Update
Cash from operations were $360.4 million in the first nine months of 2010, down from $464.4 million in the same period of 2009. Long term debt at quarter-end increased to $3.5 billion from $3.4 billion at fiscal 2009 end.
Guidance
Southern Union reaffirmed its fiscal 2010 EPS guidance range of $1.92 – $2.12 (GAAP basis) and adjusted EPS range of $1.75 – $1.95.
Houston-based Southern Union is engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas. We maintain our Neutral recommendation on Southern Union. The quantitative Zacks #4 Rank (Sell) for the company indicates downward directional pressure on the shares over the near term.
SOUTHN UNION CO (SUG): Free Stock Analysis Report
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