Diversified utility provider
Ameren Corporation
(
AEE
) is expected to report its third quarter 2012 financial results
on Friday, November 9, 2012. The Zacks Consensus Estimate for the
third quarter of 2012 is $1.42 per share (significant
year-over-year decrease of 9.74%) on revenues of $2,126 million
(year-over-year decrease of 6.3%).
Last Quarter Recap
Ameren Corporation reported stable second quarter 2012
results. During the quarter, pro forma earnings per share were 73
cents, beating the Zacks Consensus Estimate of 60 cents. Pro
forma earnings were also higher than the year-ago figure of 59
cents.
The year-over-year rise reflects increased earnings from
regulated utility operations partially offset by decreased
earnings from merchant generation operations.
During the quarter, GAAP earnings per share were 87 cents
compared with earnings per share of 57 cents in the year-ago
period. The significant variation of 14 cents per share between
GAAP and pro forma earnings was due to the reduction of tax
benefit of 18 cents and a 4 cent loss on net unrealized
mark-to-market activity.
In the quarter, net revenues declined 6.8% to $1.7 billion, in
line with the Zacks Consensus Estimate. Revenue from Electric
sales was down 6.3% year over year to $1.5 billion, while revenue
from Gas declined 12% year over year to $147 million.
Guidance
Ameren raised its pro forma earnings guidance range for
full-year 2012 to $2.25 - $2.55 per share, from the prior range
of $2.20 - $2.50 per share. GAAP earnings are now expected in the
range of $0.70 - $1.00 per share, compared to the prior range of
$0.65 - $0.95 per share.
Read our full coverage on this earnings report:
Ameren Beats EPS, Revenue In-line
Zacks
Consensus
The analysts covered by Zacks expect Ameren to post
third-quarter 2012 earnings of $1.42 per share, lower than $1.57
delivered in the prior-year quarter. Currently, the Zacks
Consensus Estimate ranges between earnings of $1.35 and $1.48 a
share.
For 2012, the Zacks Consensus Estimate stood at $2.47 per
share, below than the prior-year earnings of 2.56 per share. The
current Zacks Estimate ranges between $2.39 and $2.63 per
share.
Estimate Revisions Trend
Agreement
For the to-be-reported quarter, the estimates show a bullish
stance with 2 (out of 7) going northward over the past month with
no corresponding opposite revision. We attribute no negative
revisions to the resilience of the company's regulated businesses
and focus on cost structure improvement of its Merchant
Generation business.
A lower cost structure will help the company to counterbalance
the ongoing trend of low power prices and will act as a margin
booster for any improvement in power prices. Over the past week
however the estimates were kept intact mainly due to lack of news
or event, which could have a direct or indirect impact on these
things.
For full-year 2012, among the 10 estimates, none moved either
upward or downward over the last 7 days. However, over the past
month, 2 estimates moved upwards while 1 moved downwards.
Magnitude
The Zacks Consensus Estimate for the third quarter of 2012
fell by a penny over the last 7 days. However, it inched up by 5
cents to $1.42 per share over the last 30 days. For full-year
2012, the Zacks Consensus Estimate rose 2 cents in the last 7
days, while it moved up by 3 cents to $2.47 over the last 30
days.
Surprise History
With respect to earnings surprises, Ameren has topped the
Zacks Consensus Estimate in one out of the last four quarters.
Over the last four quarters, the surprise ranges from (6.67%) to
21.71% with an average of (7.52%).
Background
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.
With a generating capacity of 15,900 megawatts, the company,
through its subsidiaries, serves 2.4 million electric customers
and more than 0.9 million natural gas customers in a
64,000-square-mile area.
Our Recommendation
Ameren's stable and regulated electric power operations in the
Midwest market generate a relatively stable and growing earnings
stream. Future growth will be guided by improved plant
operations, higher rates in Missouri and Illinois, lower
operations and maintenance expenses, and installation of
emissions reduction equipment (scrubbers) at its generation
plants.
Currently, Ameren has a short-term (1 to 3 months) Zacks #3
Rank (Hold) and a long-term (6+ months) Neutral
recommendation.
Our cautious stance on Ameren takes into account its
significant fossil fuel based generating units and uncertainty
about the rate of recovery of the economy. To comply with state
and federal regulations, the company has to invest a significant
chunk to reduce emissions from its generation assets, including
installation of selective catalytic reduction and overfire air to
control nitrogen oxide emissions and the use of activated carbon
injection to control mercury emissions.
While Ameren's liquidity position is sound and growth
potential is also attractive, we continue to believe that the
near- to medium-term outlook for merchant power generators is
tepid. Performance in the second quarter has been affected by
lower power prices in the merchant power segment. In the near
term, the scenario is unlikely to change and the company will
resort to hedging its power prices to a greater extent.
Given these headwinds, we believe that Ameren's current
valuation adequately reflects its fairly balanced risk/reward
profile. As such, we see limited upside from current levels. This
is in line with its peers like the Illinois utility
Exelon Corporation
(
EXC
).
AMEREN CORP (AEE): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
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