Duke Energy Corp. (DUK) reported its first quarter 2010 earnings of 36 cents per share, compared to the Zacks Consensus Estimate of 32 cents and the year-earlier earnings of 28 cents. On a reported basis, including one-time items, earnings came in at 34 cents in the reported quarter compared to 27 cents in the year-ago quarter.
Duke Energy’s above-expectation results for the reported quarter were driven by favorable weather, higher retail sales volume and higher rates. In the service area of the company temperatures were below normal in the Midwest while Carolinas experienced the coldest winter on record in February 2010. This along with higher rates boosted the weather-normalized retail sales volumes in the reported quarter.
Operating Statistics
Duke Energy’s revenue in the reported quarter rose 8.5% year-over-year to $3.6 billion. Operating expenses increased 7.5% year-over-year to $2.8 billion. On an operational basis, earnings were $761 million compared with $681 million in first quarter 2009. Entergy reported as-reported earnings of $445 million compared with $344 million in the year-ago quarter.
Segmental Results
U.S. Franchised Electric and Gas
In the reported quarter the U.S. Franchised Electric and Gas segment posted earnings from continuing operations of $744 million, compared with $557 million in the first quarter of 2009. The upside came from higher pricing, favorable weather in all jurisdictions, increased retail sales volumes, primarily to industrial customers, and higher Allowance for Funds Used During Construction (AFUDC) from Duke Energy’s ongoing construction program.
Commercial Power
Duke Energy’s Commercial Power segment registered quarterly earnings of $129 million, compared to $114 million in the year-ago quarter. Higher earnings were attributed to increased mark-to-market gains on economic hedges, favorable operation and maintenance costs due to the prior-year timing of plant outages, and favorable results from the Midwest gas assets. These were partially offset by lower retail sales volumes.
Duke Energy International
In the reported quarter segmental earnings rose to $140 million, compared to $93 million in the year-ago quarter. Segmental results were driven primarily by favorable pricing at National Methanol and favorable average foreign exchange rates.
Financial Condition
Duke Energy reported cash and cash equivalents of $1.1 billion at the end of the reported period compared to $1.2 billion at the end of the year-ago quarter. The company reported $1.1 billion in cash from operating activities at the end of the first quarter of fiscal 2010, compared to $190 million at the end of the year-ago period.
At the end of the reported quarter, total debt stood at $17.2 billion with a debt-to-capitalization ratio of 44%. Total debt however was only $15.5 billion at the end of the first quarter of 2009 (debt-to-capitalization was 42%). A higher debt balance increased the interest expense, which was $210 million in the reported period compared to $184 million for the first quarter of 2009.
Outlook
Duke Energy reaffirmed its fiscal 2010 adjusted earnings range of $1.25 – $1.30 per share. This is in line with the Zacks Consensus Estimate of $1.28.
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