DTE Energy Co.’s (DTE) earnings per share of $1.38 for the first quarter of fiscal 2010 surpassed the Zacks Consensus EPS estimate of $1.20. The company also beat the prior-year quarterly earnings of $1.10. The variance in EPS primarily resulted from higher earnings at utilities boosted by a recovering economy, and strong results in non-utility Power & Industrial Projects business.
On a reported basis, including one-time items, earnings were $1.09 in the year-ago quarter compared to $1.38 in the reported quarter.
Operational Results
DTE Energy’s revenue in the reported quarter rose by 8.8% to $2.5 billion. Operating earnings in the reported quarter were $229 million, compared with year-ago quarterly operating earnings of $179 million. Net income in the reported quarter was $229 million in the absence of any non-recurring items, compared to $178 million in the first quarter of 2009.
Segment Results
Electric Utility – Operating earnings were 55 cents per share, compared to 48 cents in the year-ago quarter. The increase in earnings was primarily driven by higher rates from the January 2010 rate case order and continuous improvement projects. Partially offsetting the earnings improvements were higher depreciation on an increased asset base, higher property taxes, increased interest expense and higher benefit expenses.
Gas Utility – Operating earnings were 48 cents per share, compared to 37 cents in the year-ago quarter. The year-over-year variance is primarily due to the January 2010 implementation of higher rates and savings from continuous improvement initiatives. This was partially offset by lower sales resulting from warmer weather and customer conservation, lower midstream revenues, higher taxes and increased interest expense.
Gas Storage and Pipelines – Operating earnings were 8 cents per share, compared to 9 cents in the year-ago quarter. Earnings for this segment were consistent year-over-year with the decrease in operating earnings per share resulting from an increase in the average shares outstanding (166.3 million shares in 2010 versus 163.3 million in 2009).
Unconventional Gas Production – This segment had an operating loss of 2 cents per share, compared with a first quarter 2009 operating loss of 1 cent per share.
Power and Industrial Projects – Operating earnings came in at 11 cents per share, compared to 2 cents in the first quarter of 2009. Higher coke sales resulting from a rebound in the steel industry and new projects have fueled the increase in earnings.
Energy Trading – Operating earnings for this segment were 23 cents per share compared to 24 cents in the year-ago quarter.
Corporate and Other – This segment had an operating loss of five cents per share versus an operating loss of nine cents in the year-ago quarter. The year-over-year variance is driven primarily by lower tax expense.
Outlook
DTE Energy raised its fiscal 2010 operating earnings guidance range to $3.45 – $3.80 per share from earlier range of $3.35 – $3.75 per share. This is in line with the Zacks Consensus Estimate of $3.51 for fiscal 2010.
As of now, our short-term recommendation on the stock is Buy (Zacks Rank #2), meaning that DTE Energy is expected to outperform relative to the overall market during the next 1−3 months.
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