) has provided a preliminary earnings update for the third
quarter of 2013. The company expects operational earnings of
$2.40 per share, up 23% year over year. The figure is also above
the current Zacks Consensus Estimate by 20.6%.
The significant increase is expected on the heels of higher
net revenue and a lower effective income tax rate, partially
offset by higher non-fuel operation and maintenance and
In stark contrast to this favorable guidance, in July this year,
the company reported second quarter operational earnings of $1.01
per share that came a penny below the Zacks Consensus Estimate
and 52.1% short of the year-ago profit of $2.11 per share. The
downside mainly reflected higher income tax expenses at the
Utility and Parent & Other segments.
The company also indicated that earnings from Entergy
Wholesale Commodities declined sequentially due to lower net
revenue and higher decommissioning expense, partially offset by
lower income taxes.
The company reaffirmed its guidance for 2013 in the range of
$4.60 to $5.40.
On a reported basis, the company expects third quarter earnings
of $1.33, down 31.8% year over year. This includes impairment
charges related to the closing and decommissioning of the Vermont
Yankee Nuclear Power Station, expenses associated with the
implementation of the human capital management ("HCM") strategic
imperative and expenses associated with the proposed spin-off and
merger of Entergy's electric transmission business with
ITC Holdings Corp.
During the third quarter, the company announced its intention to
shut down the Vermont Yankee nuclear power plant in the fourth
quarter of 2013. The crucial decision came in the wake of a shale
gas induced supply glut that has lowered wholesale energy prices,
high costs for running the plant relative to its size, and
wholesale market design flaws that led to artificially low energy
and capacity prices in the region.
In the third quarter of 2013, the company had expected an
after-tax impairment charge of approximately $181 million. Going
forward, it expects to incur charges in the range of $55 million
to $60 million related to future severance and employee retention
costs through the end of 2014.
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The company is also progressing well on its HCM initiative. This
has resulted in a new internal organization structure that has
led to the elimination of 800 employees. The company expects
one-time costs associated with this phase of HCM in the range of
$145 million to $185 million. It expects the majority of these
expenses to be incurred by the end of 2013. However, going
forward, it expects total savings from HCM in the range of $200.0
million to $250.0 million by 2016 due to workforce reduction,
lower compensation and benefits, and lower contractor fees.
The company is expected to release its third quarter results on
Oct 29, 2013. The Zacks Consensus Estimate for the third quarter
and full year 2013 are currently at $1.99 per share and $4.96 per
Entergy is well positioned due to its geographically-diverse mix
of regulated and merchant operations. The initiatives taken by
the company will help in achieving its growth objectives. The
company presently has a short-term Zacks Rank #2 (Buy). Other
stocks that are worth considering in the space are
Alliant Energy Corporation
Brookfield Infrastructure Partners L.P.
), both with a Zacks Rank #2 (Buy).