Power utility company Progress Energy Inc. (PGN) announced its fourth-quarter 2011 operating earnings of 39 cents per share, falling short of the Zacks Consensus Estimate of 52 cents. The results of the company were 6 cents lower than year-ago earnings.
The contribution to operating earnings from Progress Energy Carolinas was 30 cents, while Progress Energy Florida chipped in with 26 cents. Ongoing after-tax expenses from Corporate and Other Business were 17 cents a share in the reported quarter.
GAAP loss in the quarter was 25 cents per share versus earnings of 42 cents per share in the year-ago period. The difference between GAAP and operating earnings stemmed from a 60 cent charge from refund to customers, merger related costs of 3 cents, and a cent apiece impact from impairments and plant retirement. While CR3 indemnification adjustment resulted in a gain of 1 cent.
Progress Energy’s 2011 operating earnings were $2.95 per share compared with $3.06 per share reported in 2010. Fiscal 2011 earnings fell short of the Zacks Consensus Estimate of $3.10 per share by 15 cents.
GAAP earnings of the company during 2011 were $1.94 per share versus $2.05 per share reported in 2010. The difference between GAAP and operating earnings stemmed from a 60 cent impact from refund to customers, merger related costs of 16 cents, mark-to-market impact of 16 cents, a cent impact from impairments, 2 cents from discontinued operations and CR3 indemnification adjustment charge of 6 cents.
Total Revenue
Total revenue in the fourth quarter was $1,737 million versus $2,321 million in the year-ago quarter, reflecting a decline of 25.2%. The decline in the year-over-year performance was driven by a lower contribution from Progress Energy Carolinas as well as Progress Energy Florida.
Reported results came in below the Zacks Consensus Estimate of $2,459 million.
The company generated total revenue of $8,907 million in 2011, down from $10,190 million reported in 2010.
Total 2011 revenue was lower than the Zacks Consensus Estimate of $9,689 million.
Operational Highlights
Operating expenses during the quarter and in the fiscal year decreased by 12.1% and 10.0%, respectively, from the comparable prior-year periods. The decline in expenses was mainly due to lower cost of fuel used for electric generation. The cost of fuel decreased 12.9% during the fiscal, while it decreased by 15.6% in the quarter.
The decline in costs notwithstanding, the larger decline in revenue affected the operating margins of the company.
Total electricity sales in 2011 were 95.8 billion kilowatt hours (KWh), down 6.9% from 102.9 billion KWh last year. Progress Energy Carolinas’ electricity sales totaled 56.2 billion KWh, down 5.8% year over year, while Progress Energy Florida sold 39.57 billion KWh, down 8.5% year over year.
Total energy supply in 2011 was 101.1 billion KWh, down 6.8% from 108.5 billion KWh last year, with Progress Energy Carolinas contributing 58.6 billion KWh (57.9% of total supply) and Progress Energy Florida the remaining 42.5 billion KWh (42.1% of total supply).
Financial Update
Cash and cash equivalents as of December 31, 2011, were $230 million versus $611 million as of December 31, 2010.
Net long-term debts of the company as of December 31, 2011 were $11.72 billion versus $11.86 billion as of December 31, 2010. The debt-to-capital ratio of the company at the end of year deteriorated to 57.7% versus 56.0% reported in the year-ago period.
Cash flow from operations for 2011 totaled $1.6 billion, decreasing 36.3% from the 2010 level of $2.5 billion.
Outlook
Progress Energy expects operating earnings per share for 2012 in a range of $3.10 to $3.25 per share.
Peer Comparison
NextEra Energy Inc. (NEE) competes directly with Progress Energy. The former announced operating earnings for the fourth quarter 2011 of 93 cents per share, beating the Zacks Consensus Estimate by a penny. Earnings surpassed the year-ago quarterly results by 13 cents.
Fiscal 2011 ongoing earnings came in at $4.39 per share, easily beating the year-ago figure of $4.30. The results were in line with the Zacks Consensus Estimate.
Our View
Progress Energy Inc. is all 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.
Reported results were down mainly due to lower sales in both Carolinas and Florida. The only silver lining is the growth in customer base in bothProgress Energy Carolinas and Progress Energy Florida during the reported quarter as well as for the full year.
We believe 2012 could turn out to be positive for the company, if the pending regulatory filing is settled in the company’s favor.
Progress Energy Inc. currently retains a Zacks #4 Rank, which translates into a short-term Sell 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.
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PROGRESS ENERGY (PGN): Free Stock Analysis Report
