Power utility company Progress Energy Inc. (PGN) announced its fourth-quarter 2010 operating earnings of 45 cents per share, which beat the Zacks Consensus Estimate of 43 cents. The results of the company were a nickel lower than the year-ago earnings.
The contribution to operating earnings from Progress Energy Carolinas was 42 cents, while Progress Energy Florida contributed 17 cents. Ongoing after-tax expenses from Corporate and Other Business were 14 cents a share in the reported quarter.
GAAP earnings in the quarter were 42 cents per share versus 55 cents in the year-ago results. The difference between GAAP and operating earnings stemmed from a cent apiece impact from impairments, tax levelization and discontinued operations.
Progress Energy’s 2010 operating earnings were $3.06 per share compared with $3.03 per share reported in 2009. Fiscal 2010 earnings surpassed the Zacks Consensus Estimate, as provided by 16 covering analysts, by 3 cents.
The GAAP earnings of the company during 2010 were $2.95 per share versus $2.71 per share reported in 2009. The difference between the basic GAAP and operating figures emanated from a 2 cent impact from impairments, 1 cent impact from discontinued operations and 8 cent impact due to change in the tax treatment of the Medicare Part D subsidy.
Total Revenue
Total revenue of the company at the end of the fourth quarter was $2,321 million versus $2,307 million in the year-ago quarter, reflecting a growth of 0.6%. The marginal year-over-year growth in total revenue was driven by a higher contribution from Progress Energy Carolinas, while contribution from Progress Energy Florida lagged the prior-year quarter.
Reported results came in below the Zacks Consensus Estimate of $2,473 million.
The company generated total revenue of $10,190 million in 2010, up from $9,885 million reported in 2009. Revenues in 2010 were boosted by improved performance from all its operating segments but the majority of growth came from Progress Energy Carolinas.
Total 2010 revenue was lower than the Zacks Consensus Estimate of $10,238 million.
Quarterly Highlights
Operating expenses during the quarter decreased 1.46% year over year. The cost of fuel used for electric generation decreased by 19% during the reported quarter to $726 million from $897.0 million in the year-ago quarter, while cost of power purchased decreased by 9.3% from the year-ago levels.
The decrease in total costs along with the increase in revenues helped boost operating results. Operating income during the quarter increased to $367 million from $324 million reported in the year-ago quarter.
Annual Highlights
Total electricity sales in 2010 were 102.9 billion kilowatt hours (KWh), up 4.2% from 98.73 billion KWh last year. Progress Energy Carolinas’ electricity sales totaled 59.7 billion KWh, up 4.8% year over year, while Progress Energy Florida sold 43.2 billion KWh, up 3.4% year over year.
Total energy supply in 2010 was 108.5 billion KWh, up 4.6% from 103.7 billion KWh last year, with Progress Energy Carolinas contributing 62.1 billion KWh (57.3% of total supply) and Progress Energy Florida the remaining 46.5 billion KWh (42.7% of total supply).
Operating expenses for 2010 increased marginally by 0.28% from 2009 levels. However, when compared as a percentage of total revenue the costs decreased by 218 basis points on a year-over-year basis.
Interest expenses of the company in 2010 increased by 10% from 2009 levels. The rise in interest expenses was due to higher debt levels.
Financial Update
Cash and cash equivalents as of December 31, 2010, were $611 million versus $725 million as of December 31, 2009.
Net long-term debts of the company as of December 31, 2010 were $11.86 billion versus $11.77 billion as of December 31, 2009.
Cash flow from operations for 2010 totaled $2.5 billion, increasing 11.7% from the 2009 level of $2.2 billion.
Outlook
Progress Energy expects operating earnings per share for 2011 in a range of $3.00 to $3.20 per share.
Although the company did not provide any cost guidance, in 2011, it aims to maintain its cost disciple and at the same time work on procedures relating to the merger with Duke Energy.
Peer Comparison
NextEra Energy Inc. (NEE) competes directly with Progress Energy. The former announced operating earnings for the fourth quarter 2010 of 80 cents per share, below the Zacks Consensus Estimate of 87 cents. The earnings surpassed the year-ago quarterly results by 1 cent.
Fiscal 2010 ongoing earnings came in at $4.30 per share, easily beating the year-ago figure of $4.05, but falling short of the Zacks Consensus Estimate of $4.34.
Our View
Progress Energy Inc. is set to merge with Duke Energy Corporation (DUK). Once the merger is clinched between these two North Carolina companies, clearing all necessary regulatory hurdles, it will create a business of more than 7 million customers.
We believe the growth in customer base in both Progress Energy Carolinas and Progress Energy Florida during the reported quarter as well as for the full year is a definite positive sign for the company.
We also like the measure undertaken by the company to develop its alternate energy generation portfolio. The company also assisted its consumers to use energy efficiently and effectively, which helped in saving 243 million KWh of power through out Carolinas and Florida.
Progress Energy Inc. currently retains a Zacks #3 Rank (short-term Hold rating).
Raleigh, North Carolina-based Progress Energy Inc. is an energy utility engaged in regulated electricity operations in the southeastern U.S. The company also has certain non-regulated businesses. Progress Energy is a holding company, comprising two electric utilities, serving 3.1 million customers in North Carolina, South Carolina and Florida.
DUKE ENERGY CP (DUK): Free Stock Analysis Report
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