Duke Energy Corp. (DUK) reported its second-quarter earnings of 34 cents per share, compared to the Zacks Consensus Estimate of 28 cents and the year-earlier earnings of 27 cents. On a reported basis, including one-time items, loss per share came in at 17 cents in the reported quarter compared to EPS of 21 cents in the year-ago period.
The 51-cent variance in the reported period between the reported and adjusted earnings came from the impact of Goodwill and Other Impairments (46 cents), Voluntary Opportunity Plan/Office Consolidation Costs (4 cents) and Mark-to-market impacts of economic hedges (1 cent).
Operating Statistics
Duke Energy’s revenues in the reported quarter rose 12.8% year over year to $3.3 billion, effortlessly beating the Zacks Consensus Estimate of $3.1 billion. Operating expenses increased 37.9% year over year to $3.3 billion. On an operational basis, earnings were $453 million compared with $334 million in second quarter 2009.
Entergy announced ‘as-reported’ net loss of $222 million compared with net income of $276 million in the year-ago quarter. This was due to non-cash impairment charges of approximately $660 million, primarily related to the remaining goodwill associated with non-regulated generation operations in the Midwest. Earnings were also affected by Voluntary Opportunity Plan/Office Consolidation charges of $76 million and mark-to-market impact of economic hedges of $33 million.
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 $671 million, compared with $500 million in the year-ago quarter. In the reported quarter earnings increased primarily due to favorable pricing, favorable weather in service area, higher Allowance for Funds Used During Construction (AFUDC) from Duke Energy’s ongoing construction program, and increased weather-normalized volumes, mainly in the industrial sector. This was partially offset by higher operation and maintenance costs primarily due to timing of planned outages.
Commercial Power
Duke Energy’s Commercial Power segment registered a quarterly loss of $604 million, compared to $79 million of earnings in the year-ago quarter. In the reported quarter results were impacted by non-cash impairment charges of $660 million primarily related to goodwill associated with non-regulated generation operations and other asset impairments in the Midwest. Results were also impacted by lower retail sales volumes in Ohio. These were partially offset by higher headcount of retail customers and higher wholesale margins. Wholesale margins increased due to higher volumes and prices partially offset by lower gains on coal sales.
Duke Energy International
In the reported quarter, segmental earnings rose to $126 million, compared to $68 million in the year-ago quarter. In the reported quarter results were driven primarily by favorable foreign exchange rates, favorable hydrology in Brazil and an increased contribution from National Methanol.
Other Items
Finally other items charged $122 million of net expense from continuing operations compared to $38 million charged in the year-ago quarter. The increase in net expense was due primarily to severance costs associated with the voluntary employee separation program and office consolidation.
Financial Condition
Duke Energy reported cash and cash equivalents of approximately $1 billion at the end of the reported period compared to $706 million at the end of the year-ago period. The company reported $2.1 billion in cash from operating activities at the end of the reported period, compared to approximately $1 billion at the end of the year-ago period.
At the end of the first half of 2010, total debt stood at $17.2 billion compared to $16.1 billion at fiscal-end 2009. A higher debt balance increased the interest expense, which was $212 million in the reported period compared to $186 million for the second quarter of 2009.
Outlook
Duke Energy raised its fiscal 2010 adjusted earnings range to $1.30 – $1.35 from its earlier guidance range of $1.25 – $1.30 per share.
DUKE ENERGY CP (DUK): Free Stock Analysis Report
Zacks Investment Research
