Integrys Energy Group (TEG) reported third quarter 2010 adjusted earnings of 35 cents per share, below the Zacks Consensus Estimate of 42 cents. However, results compared favorably with 29 cents earned in the third quarter of 2009. Adjusted earnings were $27.3 million compared with $22.6 million in the prior-year quarter.

Total revenue of Integrys Energy in the quarter was $997.9 million, down 23.1% from $1.3 billion in the prior-year quarter. Declines in Non-regulated revenues led to the shortfall, offset in part by a rise in Utility revenues. Revenue, however, exceeded the Zacks Consensus Estimate of $910 million. Total cost of fuel, natural gas and purchased power in the quarter was $570.1 million, down 35.4% year over year.

Integrys Energy reported operating income of $39.1 million compared with $93.3 million in the year-ago period. Interest expense in the quarter declined to $35.2 million from $41.7 million in the prior-year quarter.

Segment Results

Adjusted earnings at the Regulated Electric utility segment increased to $45.4 million from $38.3 million in the prior-year quarter. The year-over-year improvement was primarily driven by lower fuel and purchased power costs combined with retail electric rate increases at both electric utilities.

The Regulated Natural Gas Utility segment posted a loss of $24.4 million, an increase from a loss of $19.9 million a year ago due to increase in operating expenses.

Earnings at the Electric Transmission Investment segment were $11.5 million, down from $11.6 million in the prior-year period.

Adjusted loss at Integrys Energy Services was $0.5 million, an improvement from a loss of $4.7 million, mainly owing to lower operating and maintenance expense.

Adjusted loss related to the Holding Company and Other segment was $4.7 million, higher than the loss of $2.7 million in the prior-year period, largely due to a change in the effective tax rate.

Financial Update

Cash and cash equivalents of Integrys Energy at the end of the quarter were $165.3 million, a threefold increase from $44.5 million at the end of fiscal 2009. Long-term debt at the end of the quarter was $1.9 billion, down 20.8% from $2.4 billion at the end of fiscal 2009.

Net cash provided by operating activities in the nine months ended September 30, 2010, was $775.7 million, down from $1.5 billion in the same period last year. Capital expenditure for the period was $127.9 million compared with $338.2 million in the comparable period a year ago.

Guidance

Management expects adjusted earnings in the range of $3.00 – $3.17 per share and GAAP earnings in a range of $2.61 – $2.78 per share for 2010. For 2011, adjusted earnings are expected between $3.24 and $3.57 per share and GAAP earnings in a range of $3.28 – $3.61 per share.

Management expects long-term earnings per share to grow at a rate of 4% to 6% on an average annualized basis through 2015.

 
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