Diversified energy utility DPL Inc. (DPL) reported fourth-quarter 2009 results with earnings per share of 43 cents, missing the Zacks Consensus Estimate of 57 cents. Earnings also declined from 63 cents reported in the year-ago quarter. The trend was reflected in fiscal 2009 results, where EPS of $2.01 was lower than $2.12 in fiscal 2008.
Lower EPS stemmed from a 9% decrease in retail sales due to adverse economic and milder weather conditions; lower wholesale power prices; lower gains recognized from the sale of coal and emission allowances; higher fuel costs; higher pension and employee benefit related costs; and costs associated with the early retirement of $52 million of 8.125% long-term debt.
Estimate Revisions Trend
While 7 analysts have been covering the stock, no up and downward movements in estimate revisions for fiscal 2010 were noticed for the last 7 and 30 days. DPL’s fiscal 2010 EPS as per the Zacks Consensus Estimate is presently $2.50, in line with the company’s guidance range of $2.35 – $2.60. The stock has fluctuated substantially over the last four quarters, with the average remaining at positive 2.39%.
Operational Performance
Quarterly revenue of $405.4 million comfortably beat the year-ago quarterly revenue of $392.2 million. The trend however was reversed when fiscal 2009 revenue of $1.6 billion fell short by $12.7 million compared to fiscal 2008 revenue. The deviation comes from a lower retail sales volume and lower average wholesale market prices. The downside was partially offset by higher average retail rates, and increased wholesale sales volume.
Gross margin increased $17.1 million, or 2%, to $998.3 million in fiscal 2009 compared to $981.2 million in fiscal 2008. Fuel Costs increased $87.4 million in fiscal 2009 to $330.4 million as compared to fiscal 2008. Purchased Power costs decreased $117.2 million in fiscal 2009 to $260.2 million as compared to fiscal 2008.
Operation and maintenance expense increased $24.0 million, or 8%, in 2009 compared to 2008.
Financial Condition
DPL ended fiscal 2009 with cash and cash equivalents of $74.9 million compared to $62.5 million at fiscal-end 2008, an increase of $12.4 million. Total debt of approximately $1.2 billion is in the form of fixed-rate instruments. The company generated $526.1 million of cash from operating activities in fiscal 2009.
Dayton, Ohio-based DPL was nominated among the 100 most trustworthy companies by Forbes based on accounting and governance practices. The company sells electricity through its principal subsidiary, The Dayton Power and Light Company. DPL owns approximately 900MW of natural gas and diesel peaking generation capacity and 2,800MW of coal-fired generation capacity. We maintain our market Neutral recommendation on the Zacks #3 Rank (‘hold’) stock.
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