A leading electric and gas utility,
CenterPoint Energy Inc.
) reported its first quarter 2012 results. During the quarter,
adjusted earnings were 33 cents per share, in line with the Zacks
Consensus Estimate and a penny lower than the year-ago figure.
The results reflect a mild winter and low natural gas prices.
However, the company's diversified portfolio of electric and
natural gas businesses could offset these negatives to some
On a reported basis, the company clocked earnings of 34 cents
per share versus 35 cents in the year-ago quarter. In the reported
quarter, the variance of 1 cent between reported and adjusted
earnings per share was due to natural gas inventory write-down of 1
cent, loss on Indexed debt securities of 5 cents, which was more
than offset by a mark-to-market gain of 7 cents on marketable
CenterPoint Energy's total revenues for the reported quarter
fell 19.4% to $2.08 billion year over year. Revenue also lagged the
Zacks Consensus Estimate of $2.83 billion.
Natural gas expenses were down 34.3% year over year to $969
million. Operation and maintenance expense increased 3.6% year over
year to $455 million. Overall, operating income declined 7.1% year
over year to $338 million.
Electric Transmission & Distribution
During the quarter, the segment generated operating income of
$107 million, up 5.9% year over year. The current year operating
income includes $70 million from the regulated electric
transmission & distribution utility operations ("TDU") and $37
million from securitization bonds, both up from the previous year
Operating income at TDU increased attributable to higher
miscellaneous revenues, increase in number of customers, higher
returns associated primarily with the company's recovery of the
true-up proceeds. However, these gains were partially offset by a
milder weather and impact of new rates implemented in September
Natural Gas Distribution
Segment operating income was $121 million, down from $142
million due to a significantly warm winter.
The segment generated operating income of $60 million during the
quarter, down 21% from the previous-year quarter. The downside
reflects lower revenues due to an expired backhaul contract and
lower off-system sales primarily due to compressed basis
However, these negatives were partially offset by higher
revenues from previously restructured contracts with the company's
natural gas distribution affiliates and increased ancillary
The Field Services segment reported an operating income of $47
million in the quarter, up 30.6% year over year driven by higher
gathering volumes in the Haynesville and Fayetteville shales.
However, these positives were partially offset by lower prices
received from sales of retained gas.
Competitive Natural Gas Sales and Services
Operating income generated by the segment amounted to $1 million
compared with $10 million in the year-ago quarter. Operating income
dwindled due to a mild winter, compressed margins and higher
operation and maintenance expenses.
CenterPoint Energy reported cash and cash equivalents of $1.1
billion at the end of the reported quarter versus only $0.095
billion at the end of the previous year period. Total long-term
debt was $9 billion compared with $8.7 billion at the end of the
first quarter of 2011.
During the quarter, net cash provided by operating activities
was $424 million compared with $627 million in the year-ago
quarter. Total capital expenditure was $242 million compared with
$253 million in the year-ago period.
At the Peer
One of the company's peers,
American Electric Power Co. Inc.
), reported first quarter 2012 adjusted earnings per share of 80
cents, at par with the Zacks Consensus projection. However,
earnings per share missed the prior-year figure by 2 cents.
American Electric Power reported net revenue of $3,625 million in
the first quarter, below the Zacks Consensus Estimate of $3,684
million and the year-ago quarter revenue of $3,730 million.
CenterPoint Energy maintained its earnings guidance for fiscal
2012 in the broad range of $1.08-$1.20 per share.
CenterPoint Energy, with its balanced portfolio of electric and
natural gas businesses, provides a diversified risk profile, along
with stable earnings and cash flow. Once again, quarterly earnings
were saved by the company's broad and diversified portfolio. Its
service territory is spread across six states that protect it from
individual state specific risks.
Going forward, our bullish outlook for the company is supported
by its strong liquidity position, stable regulated operations,
ongoing infrastructure development projects, and a strong balance
However, these positives are partially offset by pending
regulatory cases, including the outcome of the Texas rate case, a
tepid economy, lower demand for electricity, declining wholesale
natural gas prices and a significant presence in a hurricane-prone
section of the U.S.
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
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