Before the bell,
Ameren Corporation
(
AEE
) reported third quarter 2012 results. During the quarter, pro
forma earnings per share were $1.33, falling short of the Zacks
Consensus Estimate of $1.42. Pro forma earnings were also lower
than the year-ago figure of $1.57. The decrease in year-over-year
results reflects a decline in earnings of each of Ameren's three
business segments.
Ameren Illinois' earnings were negatively impacted by its
September 2012 rate order for electric delivery service and a
change in the quarterly distribution of revenues and earnings
resulting from formula ratemaking.
Ameren Missouri earnings declined due to lower electric sales and
a higher effective income tax rate partially offset by the
benefit of a 2011 electric rate adjustment.
Merchant generation segment earnings declined owing to lower
power prices and higher fuel costs.
During the quarter, GAAP earnings per share were $1.54 compared
with earnings per share of $1.18 in the year-ago period.
In the reported the significant variation of 21 cents per share
between GAAP and pro forma earnings was due to increase in tax
benefit related to asset impairment and annual estimated
effective income tax rate of 18 cents and 3 cents gain from net
unrealized mark-to-market activity.
Operational Performance
In the reported quarter, net revenues declined 11.8% to $2.0
billion, falling below the Zacks Consensus Estimate of $2.3
billion. Revenue from Electric sales was down 12.5% year over
year to $1.9 billion, while revenue from Gas remained flat year
over year at $130 million.
Segment Performance
Ameren Missouri:
During the quarter, the segment reported GAAP earnings of $236
million compared to $190 million for the third quarter of 2011.
Pro forma earnings were $235 million, compared to third quarter
2011 earnings of $248 million. The decrease in pro forma earning
reflects lower electric sales and a higher effective income tax
rate. This was partially offset by the benefits of a 2011
electric rate adjustment.
In the reported quarter temperatures, while
warmer-than-normal, were similar to those experienced in the
third quarter of 2011. The GAAP earnings comparison was affected
by the factors mentioned above as well as a $55 million charge in
the third quarter of 2011 related to a disallowance and a $1
million gain in the third quarter of 2012 as opposed to a $3
million loss in the third quarter of 2011 from net unrealized
mark-to-market activity.
Ameren Illinois:
During the quarter, the segment reported GAAP earnings of $71
million, compared with earnings of $98 million in the year-ago
period. Pro forma earnings were $70 million, compared with
year-ago earnings of $99 million.
This decline in earnings reflected the utility's September
2012 rate order for electric delivery service and a change in the
quarterly distribution of revenues and earnings resulting from
formula ratemaking. The GAAP earnings comparison was affected by
the factors mentioned above as well as a $1 million gain in the
third quarter of 2012 as opposed to a $1 million loss in the
third quarter of 2011 from net unrealized mark-to-market
activity.
Merchant Generation:
The segment reported earnings of $20 million, compared to a third
quarter 2011 GAAP loss of $9 million. Pro forma earnings were $22
million, compared to third quarter 2011 earnings of $24 million.
The decrease in pro forma earnings reflected the impact on
margins of lower power prices and higher fuel costs. This was
partially offset by lower depreciation and operations and
maintenance expenses.
The GAAP earnings comparison was affected by the factors
mentioned above as well as a third quarter 2012 non-cash $4
million reduction in the income tax benefit partially offset by a
$2 million gain in the third quarter of 2012. In the third
quarter of 2011 GAAP earnings included asset impairment charges
of $21 million and a $12 million loss from net unrealized
mark-to-market activity.
Ameren Other:
In the reported quarter GAAP earnings for Ameren were increased
by a non-cash income tax benefit of $47 million related to the
first quarter 2012 Duck Creek Energy Center asset impairment
charge.
Financial Condition
At the end of September 30, 2012, Ameren reported cash and cash
equivalents of $298 million compared with $522 million in the
year-ago period. As of September 30, 2012, long-term debt, net
rose slightly to $6.8 billion versus $6.7 billion at year-end
2011.
During the first nine months of 2012, net cash provided by
operating activities was $1.4 billion compared with $1.6 billion
at the end of the year-ago period. Capital expenditure in the
first nine months of 2012 was $905 million, up from $758 million
the comparable year-ago period.
Guidance
Ameren narrowed its pro forma earnings guidance range for
full-year 2012 to a range of $2.35 - $2.45 per share, compared to
the prior range of $2.25 - $2.55 per share. GAAP earnings are
also narrowed in the range of $0.80 - $0.90 per share, from the
earlier range of $0.70 - $1.00 per share.
Our Take
Ameren's stable and regulated electric power operations in the
Midwest generate a relatively stable and growing earnings stream.
We expect future growth to be driven by improved plant
operations, focus on cost management, rate relief and
installation of emissions reduction equipment (scrubbers) at its
generation plants.
Also, its predominantly coal-based generation assets and pending
regulatory cases are a matter of concern. The company presently
retains a short-term Zacks #3 Rank (Hold) that corresponds with
our long-term Neutral recommendation on the stock.
St. Louis-based Ameren Corporation is a holding company which
engages in the generation and distribution of electricity and
natural gas and serves residential, commercial, industrial and
wholesale end-markets in Missouri and Illinois.
AMEREN CORP (AEE): Free Stock Analysis Report
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