CenterPoint Energy Inc. (CNP) posted earnings of 27 cents per share for the fourth quarter of 2011, beating past the Zacks Consensus Estimate of 19 cents. Earnings, however, came a couple of cents lower than the year-ago quarterly earnings of 29 cents.
CenterPoint Energy posted fiscal 2011 operating earnings of $1.80 per share, comprehensively beating the Zacks Consensus Estimate of $1.14 and fiscal 2010 earnings of $1.07 per share.
On a reported basis, however, earnings for fiscal 2011 came in at $3.17 per share. The variance between operating and reported earnings in fiscal 2011 reflects the final resolution of the appeals of the 2004 true-up order of the Texas Public Utility Commission.
Revenue
CenterPoint Energy’s total revenue for the reported quarter was $2,145 million, far below the Zacks Consensus Estimate of $2,727 million. However, revenue was higher when compared with the year-ago quarter figure of $2,098 million.
CenterPoint Energy, in fiscal 2011, recorded revenue of $8,450 million, lower than the Zacks Consensus Estimate of $9,032 million and fiscal 2010 revenue of $8,785 million.
Segment Results
Electric Transmission & Distribution
The Electric Transmission & Distribution segment reported operating income of $93 million for the fourth quarter of 2011. Of this, $62 million came from the regulated electric transmission & distribution utility operations (TDU) and $31 million from securitization bonds.
Operating income for the fourth quarter of 2010 was $90 million, consisting of $56 million from the TDU and $34 million related to securitization bonds. Operating income of TDU benefited from higher net transmission revenues, timing of energy efficiency cost recovery and an increase in the number of customers. These gains were partially offset by the recent rate case impact and higher operation and maintenance expenses.
Natural Gas Distribution
The Natural Gas Distribution segment reported an operating income of $73 million for the fourth quarter of 2011 versus $86 million in the year-ago quarter. The decline in operating income resulted primarily from higher operation and maintenance expenses.
Interstate Pipelines
The Interstate Pipelines segment reported operating income of $52 million in the fourth quarter 2011 compared with $63 million in the year-ago quarter. Operating income in the reported quarter decreased due to lower revenues primarily related to an expired backhaul contract and lower off-system sales. These declines were partially offset by increased ancillary services.
Field Services
The Field Services segment reported operating income of $53 million in the quarter under review compared with $57 million in the year-ago quarter. Operating expenses for the fourth quarter of 2010 included a gain of $21 million associated with the sale of a small, non-strategic gas gathering system.
Competitive Natural Gas Sales and Services
The Competitive Natural Gas Sales and Services segment reported operating income of $3 million for the fourth quarter of 2011 compared with a break-even for the same period of 2010. The fourth quarter of 2011 included a $5 million charge related to an early capacity release on pipeline transportation.
In addition, the fourth quarter of 2011 included gains of $1 million resulting from mark-to-market accounting for derivatives associated with certain forward natural gas purchases and sales used to lock in economic margins compared to charges of $10 million for the same period of 2010. The fourth quarter of 2011 also included a $4 million write-down of natural gas inventory to the lower of average cost or market.
Financial Condition
CenterPoint Energy reported cash and cash equivalents of $220 million at the end of fiscal 2011 from $199 million at the end of the fiscal 2010. At fiscal-end 2011, the company reported $1,888 million in cash from operating activities, compared with $1,386 million at the end of fiscal 2010. Long-term debt decreased to $8,641 million from $9,001 million at fiscal-end 2010.
Outlook
CenterPoint Energy affirmed its earnings guidance for fiscal 2012 in the range of $1.08-$1.20 per share.
CenterPoint Energy Inc., with its balanced portfolio of electric and natural gas businesses, provides a diversified risk profile, along with stable earnings and cash flow. Going forward, our bullish outlook for the company is supported by stable regulated operations, higher rates, ongoing infrastructure development projects, a strong balance sheet and a high dividend yield. However, this is partially offset by pending regulatory cases, a tepid economy, lower demand for electricity, falling wholesale natural gas prices and a significant presence in a hurricane prone region in the U.S.
We continue to retain our long-term Neutral stance on CenterPoint Energy in the absence of any positive triggers. In the near term, however, we assign a Zacks #4 Rank (short-term Sell recommendation) to the stock, in line with peers like Integrys Energy Group Inc. (TEG) and The AES Corporation (AES).
To read this article on Zacks.com click here.
Zacks Investment Research
