Before the bell, Entergy Corporation (ETR) reported its fourth quarter and fiscal 2010 results. In the reported quarter, the company reported operational EPS of $1.30, scraping past the Zacks Consensus Estimate of $1.29. Earnings however, came lower than the year-ago quarter’s $1.75.
Earnings in the reported quarter were lower than the year-ago period by 45 cents. Of these Utility EPS was 9 cents lower due to higher fossil outage spending, higher reliability-related spending, and higher compensation & benefit costs.
Earnings dived at Entergy Wholesale Commodities by 23 cents primarily due to additional planned and unplanned outage days, lower pricing of both nuclear and non-nuclear wholesale assets, reduced other income associated with decommissioning trusts and a higher effective income tax rate.
Lastly Parent & Other segmental loss rose 13 cents year-over-year due to higher interest expense along with a host of other rising overhead items.
On a reported basis, including one-time items, earnings came in at $1.26 for the reported quarter compared to $1.64 in the year-ago quarter.
Fiscal 2010 operational earnings came in at $7.10 per share, beating the Zacks Consensus Estimate of $7.01 and fiscal 2009 earnings of $6.67 per share.
Operational Results
Revenue in the reported quarter rose 1.4% year-over-year to $2.5 billion, falling short of the Zacks Consensus Estimate of $2.8 billion. Of this Electricity revenue was up 8.1%, Natural Gas was down 4.6% while Competitive Businesses were down 14.7%.
On an operational basis, earnings were $235 million compared with $334.9 million in the year-ago quarter; on a reported basis, Entergy’s earnings came in at $228.3 million compared with $313.8 million in the year-ago quarter.
Fiscal 2010 revenue was $11.5 billion versus the Zacks Consensus Estimate of $11.7 billion. Full year revenue however outdid $11.7 billion generated a year ago.
Segmental Results
Utility
Utility’s quarterly earnings both on reported and operational basis were $114.3 million compared to $137.9 million in fourth quarter 2009. Residential sales, on a weather-adjusted basis, increased 0.6% year-over-year.
Commercial and governmental sales, on a weather-adjusted basis, increased 1.5%, while industrial sales increased 7%. The industrial customer segment reflected strong sales growth on continuing signs of economic recovery, which was also evident in the residential and commercial classes.
The quarter-to-quarter increase in weather-adjusted sales in the residential sector came from Arkansas, Louisiana and New Orleans, while commercial sales witnessed an all-encompassing growth. Growth in industrial sales came from increased demand from small, mid-sized and large customers.
Chemicals, refining and miscellaneous manufacturing sectors led the improvement among the large industrial customer segment. This was partially offset by a decline in demand from pulp and paper industries.
Entergy Wholesale Commodities
Entergy Wholesale Commodities’ earnings were $149.9 million on an as-reported basis, compared to as-reported earnings of $197.9 million in the year-ago quarter. On an operational basis, quarterly earnings were $156.7 million, versus $209.9 million, in the fourth quarter of the prior year.
Parent & Other
Parent & Other reported a loss of $35.9 million on an as-reported basis compared to a loss of $22.1 million in the year-ago quarter. On an operational basis, Parent & Other reported a loss of $35.9 million versus a loss of $12.9 million in the year-ago quarter.
Financial Condition
Entergy in fiscal 2010 generated $3.9 billion from operating activities compared to $2.9 billion in fiscal 2009. Cash and cash equivalents at the end of the reported period were $1.3 billion versus $1.7 billion at fiscal-end 2009. Long-term debt increased to $11.4 billion compared to slightly above $10.7 billion at fiscal-end 2009.
Guidance
Entergy affirmed its fiscal 2011 earnings guidance in the range of $6.35−$6.85 per share on both as-reported and operational bases.
New Orleans-based Entergy Corp. is primarily engaged in electric power production and retail distribution of power. With 30,000MW of generating capacity, it distributes electricity to 2.6 million customers in Arkansas, Louisiana, Mississippi and Texas.
In the near-term, however, we retain our long-term Neutral stance on Entergy in the absence of any positive triggers, which is supported by a Zacks #3 Rank (short-term Hold recommendation) for the stock. The near-term cautious stance is shared by its peers like American Electric Power Company Inc. (AEP) and Dominion Resources Inc. (D) also.
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