Integrated energy company,
Entergy Corporation
(
ETR
) provided second-quarter 2012 preliminary as-reported earnings
expectation of approximately $2.05 per share and operational
earnings expectation of approximately $2.10 per share. Results for
second quarter 2011 were $1.76 per share on both an as-reported
basis and an operational basis. The increase in second quarter 2012
earnings was driven by higher earnings at Utility and Entergy
Wholesale Commodities, which was partially offset by lower results
at the Parent & Other segment.
The special item in the second quarter of 2012 was due to expenses
associated with the proposed spin-off and merger of Entergy's
electric transmission business with
ITC Holdings Corporation
(
ITC
).
Entergy had earlier, in December 2011, entered into a definitive
agreement with ITC Holdings under which the former will divest its
electric transmission business to the latter for gross cash of
$1.775 billion. The divested business would be merged with the
operations of ITC Holdings. The company expects the transaction to
complete by 2013.
Entergy also reaffirmed its previously issued operational earnings
guidance for 2012. Entergy is slated to release its second-quarter
2012 numbers on July 31, 2012.
Segment Details
Utility
The quarter-over-quarter increase in Utility's operational earnings
was driven by an agreement reached with the Internal Revenue
Service regarding storm cost financings in Louisiana. The
resolution of this item resulted in a significant decrease in
income tax expense. The benefits will be shared with customers of
Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC.
However, this was partially offset by a regulatory charge reducing
Utility net revenue to reflect this customer sharing.
Excluding this regulatory charge, Utility net revenue was modestly
better year over year. Retail sales volume in the second quarter of
2012 reflected warmer-than-normal weather as well as
weather-adjusted sales growth across all customer classes. However,
the weather effect variance was unfavorable when compared to the
well above-normal temperatures experienced throughout the service
territory in the second quarter of 2011. Higher non-fuel operation
and maintenance expense served as a partial offset to the increased
operational earnings.
Entergy Wholesale Commodities (EWC)
The quarter-over-quarter increase in earnings at Entergy Wholesale
Commodities was due primarily to lower decommissioning expense and
a lower effective income tax rate. A reduction in the
decommissioning liability recorded in the current period was due
primarily to an updated decommissioning study for the Pilgrim
Nuclear Power Station, which received its 20-year license renewal
from the Nuclear Regulatory Commission in late May. These positive
items were partially offset by a decrease in EWC net revenue driven
by lower pricing associated with the nuclear fleet. Also, providing
a partial offset in quarterly results was an increase in non-fuel
operation and maintenance expense.
Parent & Other
At the Parent & Other segment, operational results declined
during the quarter due to an increase in income tax expense on
Parent & Other activities. Both periods reflected favorable tax
items. Second quarter of 2012 benefited from a favorable decision
received in June 2012 from the U.S. Court of Appeals for the Fifth
Circuit affirming Entergy's entitlement to claim foreign tax
credits for the U.K. Windfall Tax. The second quarter of 2011
benefited from a reversal of a tax reserve related to an IRS
settlement, which exceeded income tax adjustments recorded in the
current period.
Earnings Guidance
Entergy reaffirmed its previously issued 2012 operational earnings
guidance in the range of $4.85 to $5.65 per share. Entergy also
updated its as-reported earnings guidance for 2012 to a range of
$3.49 to $4.29 per share. Special items recorded year-to-date total
approximately $(1.36) per share to reflect the first quarter 2012
asset impairment of the Vermont Yankee nuclear power plant and the
transmission business spin-off and merger expenses in the first two
quarters of the year.
New Orleans, Louisiana based Entergy is an integrated energy
company engaged primarily in electric power production and retail
distribution operations. Entergy owns and operates power plants
with approximately 30,000 megawatts of electric generating
capacity, and it is the second-largest nuclear generator in the
United States. Entergy delivers electricity to 2.8 million utility
customers in Arkansas, Louisiana, Mississippi and Texas. The
company is the second largest U.S. nuclear power generator after
Exelon Corporation
(
EXC
).
Entergy retains a short-term Zacks #3 Rank (Hold) rating. We also
have a long-term Neutral recommendation on the stock.
ENTERGY CORP (ETR): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
ITC HOLDINGS CP (ITC): Free Stock Analysis
Report
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