CenterPoint Energy Inc.
), a domestic energy delivery company, reported its third-quarter
2012 results with adjusted earnings of 40 cents per share,
surpassing the Zacks Consensus Estimate of 34 cents per share and
prior-year figure of 38 cents per share.
On a reported basis, the company posted earnings of 2 cents per
share versus $2.27 in the year-ago quarter. The variance of 38
cents between the reported and adjusted was driven by step
acquisition gain, after-tax of 21 cents related to the
acquisition of the additional 50% interest in the Waskom gas
gathering and processing joint venture. The variance of 38 cents
also included a goodwill impairment charge of 59 cents per share
associated with the competitive natural gas sales and services
CenterPoint Energy's total revenue for the reported quarter fell
9.4% to $1.71 billion year over year and lagged the Zacks
Consensus Estimate by $558 million.
Natural gas expenses were down 29.3% year over year to $520
million. Operation and maintenance expense inched up 2.2% year
over year to $458 million. Overall, operating income declined
significantly 75.4% year over year to $88 million. However,
excluding the goodwill impairment charge of $252 million,
operating income was $340 million versus $357 million in the
Electric Transmission & Distribution
During the quarter, the segment generated operating income of
$242 million, marginally down 0.82% year over year. The operating
income includes $205 million from the regulated electric
transmission & distribution utility operations ("TDU") and
$37 million from Transition and System Restoration Bonds.
Operating income at TDU was down 3.76% year over year due to
return of normal weather compared to last year. Further, new
rates implemented in September 2011 was also responsible for the
However, these negatives were partially offset by addition of
more than 40,000 customers since the third quarter of 2011,
higher transmission-related revenue, ongoing recognition of
deferred equity returns associated primarily with the company's
true-up proceeds, and higher miscellaneous revenue. Operating
income related to securitization bonds was up 19.4% year over
Natural Gas Distribution
Segment operating income was $5 million versus a loss of $2
million in the year-ago quarter. The upside reflects customer
growth, reduced expenses, and rate changes. However, these were
partially offset by an increase in depreciation due to assets
being placed in service.
Competitive Natural Gas Sales and Services
Segment operating loss (excluding goodwill impairment charges)
was $7 million versus an operating loss of $10 million in the
year-ago quarter. The improvement reflects termination of
uneconomic transportation contracts and an increase in retail
sales customers and volumes.
The segment generated operating income of $48 million during the
quarter, down 20% from the prior-year quarter. The decrease in
operating income was mainly due to reductions in seasonal and
market sensitive transportation services and ancillary services,
as well as a reduction in compressor efficiency on Carthage to
Perryville pipeline due to lower volumes.
The Field Services segment reported an operating income of $55
million in the quarter, down 9.8% year over year. The downside
reflects lower commodity prices from the sale of retained natural
gas, the timing of revenues from contracts with throughput
commitments, and higher depreciation expense due to assets being
placed in service. However, these were partially offset by growth
in the core business and additional income from recent
Operating loss generated by the segment amounted to $3 million
versus a profit of $4 million in the year-ago quarter.
CenterPoint Energy reported cash and cash equivalents of $722
million at the end of the reported quarter versus $103 million at
the end of the previous year period. Total long-term debt was
$8,641 million compared with $8,497 million at the end of the
third quarter of 2011.
The company re-affirmed its guidance in the range of $1.13 to
$1.23 for full-year 2012. The guidance reflects expected impact
of the two recently announced acquisitions by the field services
business, various economic and operational assumptions related to
the business segments in which the company operates as well as
the company's performance till date.
However, it excludes a non-recurring gain related to the July
2012 acquisition of the additional 50% interest in the Waskom Gas
Processing Company and the goodwill impairment charge.
At the Peer
Recently, one of the company's peers,
NRG Energy Inc.
) reported net loss of 1 cent per share in the third quarter of
2012, way below the Zacks Consensus Estimate of earnings of 53
cents per share. However, the results were narrower than the
year-ago loss of 24 cents per share.
NRG Energy's total operating revenue of $2.33 billion in
third-quarter 2012 decreased 12.8% from $2.67 billion in the
year-ago quarter. Also, the quarterly revenue fell short of the
Zacks Consensus Estimate of $2.89 billion.
CENTERPOINT EGY (CNP): Free Stock Analysis
NRG ENERGY INC (NRG): Free Stock Analysis
To read this article on Zacks.com click here.
CNP Energy's bottom line surpassed our expectation; whereas the
top line fell below the Zacks Consensus Estimate. CenterPoint
Energy's stable and regulated electric power operations and gas
distribution utilities generate a relatively stable and growing
Also, a divergent and diversified service territory spread across
six states diversifies risk and insulates the company from
individual state specific risks. This is complimented by its
expanding pipeline network, the expansion of its pipeline
capacity, rate base growth and gas well connections. However,
this is partially offset by pending regulatory cases, the tepid
economy, lower demand for electricity, volatility in wholesale
natural gas prices.
The company presently retains a short-term Zacks #2 Rank (Buy).
We have a long-term Neutral recommendation on the stock.