Electricity and natural gas company
Xcel Energy Inc.
's (
XEL
) operating earnings for the second quarter 2012 of 41 cents per
share were higher than the Zacks Consensus Estimate of 35 cents and
the year-ago results of 36 cents.
The company's year-over-year growth in earnings was attributed
to higher electric margin, resulting from various rate increases
and warmer-than-normal weather across all its service
territories.
Xcel Energy's GAAP earnings for the reported quarter were 38
cents per share versus 33 cents per share recorded in the year-ago
quarter. The difference between GAAP and pro forma earnings of 3
cents was due to certain one-time items.
Total Revenue
Xcel Energy's total revenue for second-quarter 2012 was $2.27
billion versus $2.43 billion reported in the year-ago period,
reflecting a decline of 6.7%. The year-over-year decline in revenue
was due to lower contribution from all its reporting segments.
Reported quarter revenue was also lower than the Zacks Consensus
Estimate of $2.47 billion.
Segment-wise Revenue
Electric
: Revenue from this segment during the second quarter 2012
decreased by 4.3% to $2.03 billion from $2.12 billion in the
year-ago period.
Revenues at this segment were largely impacted by the
fluctuation in the price of natural gas, coal and uranium used in
the generation of electricity. However, the fuel recovery
mechanism, which allows the company to recover current expenses,
came in handy; despite a small dip in revenues and electric margins
improved 3.9% year over year to $1.18 billion.
Natural gas
: Revenue at this segment decreased 24.1% to $221.3 million from
$291.6 million in the year-ago period.
Other
: Segment revenue in the reported quarter was $16.5 million versus
$18.3 million in the year-ago period, reflecting a decline of
9.8%.
Quarterly Highlights
Total operating expenses incurred by Xcel Energy during the
second quarter decreased 10.1% to $1.87 billion from $2.07 billion
in the year-ago quarter. The decrease in expenses was mainly due to
an 18.1% fall in input costs used for generation of
electricity.
Operating expenses, as a percentage of total revenue, also
decreased by 309 basis points year over year, which positively
impacted the operating results of the company. As a result,
operating income increased by 12.9% year over year to $405.7
million from $359.4 million reported in the year-ago period.
Financial Update
Long-term debts of the company as of June 30, 2012 were $8.7
billion versus $9.3 billion as of June 30, 2011. During the second
quarter, the company issued $100 million first mortgage bonds with
a coupon rate of 4.5%.
Xcel Energy from time to time issues debt and equity to
refinance debts, fund operations and for other general corporate
purposes. During the second half of 2011 the company plans to raise
around $1.7 billion through the issue of bonds and unsecured
notes.
2012 Guidance
Xcel Energy expects earnings per share for 2012 to be on the
lower end of the guidance range of $1.75-$1.85 per share. The
guidance assumes normal weather pattern during the rest of the
year.
Operating and maintenance expenses of the company are expected
to increase by 1% year over year, while depreciation expense is
projected to increase in a range of $40 million to $50 million from
2011 levels.
Interest expenses are forecast to go up by $10 million, while
the effective tax rate of the company is expected to be in the
range of 34% to 35% in 2012.
Peer Update
Xcel Energy's competitor,
American Electric Power Co. Inc
. (
AEP
), announced operating earnings for the second quarter 2012 of 77
cents per share versus 73 cents per share in the year-ago quarter,
reflecting growth of 5.5%. The results of the company also
surpassed the Zacks Consensus Estimate of 72 cents per share.
American Electric Power's revenue during the reported quarter
was $3.6 billion, flat with both the Zacks Consensus Estimate and
the year-ago figure.
Our View
The company reported mixed results during the quarter and exited
the quarter with quite a few pending rate cases in its service
territories. We believe a favorable outcome in these cases will
surely expand the margins of the company.
The company's decision to increase the dividend rate is also
appreciable. During the quarter, the board of directors of Xcel
Energy approved to increase the annual dividend payment rate by 4
cents.
Based in Minneapolis, Minnesota, Xcel Energy is a U.S.
electricity and natural gas company, with operations in eight
Western and Midwestern states. Xcel Energy currently retains a
Zacks # 3 Rank (short-term Hold rating).
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