Diversified utility
company
Northeast Utilities'
(
NU
) fourth quarter 2011 pro forma earnings of 74 cents per share beat
the Zacks Consensus Estimate of 69 cents and were also higher than
the year-ago quarter earnings of 69 cents per share.
The company also reported quarterly GAAP earnings of 64 cents,
lower than the year-ago figure of 73 cents. The difference between
quarterly GAAP and pro forma earnings was due to an after-tax
charge associated with the storm fund reserve for the customers of
Connecticut Light and Power Company ("CL&P").
Northeast Utilities' 2011 pro forma earnings were $2.38 per
share compared with $2.16 per share in the previous year. Fiscal
year 2011 pro forma earnings also surpassed the Zacks Consensus
Estimate of $2.33.
Northeast Utilities' fiscal 2011 GAAP earnings were $2.22 per
share versus $2.19 in 2010. The variance between GAAP and pro forma
earnings of fiscal 2011 was due to higher after-tax expenses
associated with the
NSTAR
(
NST
) merger and after-tax charge related to the storm fund reserve to
benefit the customers of CL&P.
Total Revenue
Northeast Utilities reported quarterly operating revenue of
$1,068.0 million, down 11.3% from the year-ago quarter figure of
$1,204.0 million. The quarterly revenue missed the Zacks Consensus
Estimate of $1,333.0 million.
In 2011, the company reported operating revenue of $4,465.7
million, down 8.8% year over year from $4,898.2 million. The fiscal
2011 revenue lagged the Zacks Consensus Estimate of $4,974.0
million.
Electric Sales Volumes and Expenses
Northeast Utilities' retail electric sales in the fourth quarter
were down 4.5% from the comparable 2010 quarter to 7,895 Giga watt
hours ("GWh"), due to milder weather in 2011 and the impact of
outages as a result of the October snowstorm.
On a weather-adjusted basis, however, electric sales decreased
2.5% from the year-ago quarter. Yankee Gas' natural gas sales
decreased 8.5% to 12.7 billion cubic feet ("Bcf"). On a
weather-adjusted basis, Yankee Gas sales showed an increase of 2.3%
year over year.
Northeast Utilities' operating income in fourth quarter 2011
totaled $184.9 million compared with $195.3 million in fourth
quarter 2010.
On the cost side, Northeast Utilities' results continued to be
impressive given its continued cost control measures. Total
operating expense dipped 12.4% year over year to $883.2 million in
the quarter. Lower fuel and power cost coupled with lower
amortization costs led to the decline, offset by a rise in
depreciation, maintenance and other operating expenses.
Segment Earnings
Distribution & Generation:
Earnings at the segment, comprising Electric and Gas
Distribution earnings, totaled $65.2 million in the quarter,
compared with $75.5 million in the fourth quarter of 2010.
The quarterly earnings dipped mainly due to lower earnings from
the CL&P Company owing to storm-related charges, and higher
health care, pension, operation, depreciation and tax expenses.
These were partially offset by higher earnings generated from the
Western Massachusetts Electric Company's ("WMECO") and Public
Service Company of New Hampshire's ("PSNH") distribution and
generation segments.
Yankee Gas Services Company reported earnings of $11 million in
the fourth quarter of 2011, compared with $16.6 million in the
fourth quarter of 2010 as a result of a decline in natural gas
sales.
Transmission
:
The Transmission segment's quarterly earnings of $71.2 million,
increased 41% from $50.5 million earned in the prior-year quarter,
reflecting a lower effective tax rate; partially offset by higher
transmission costs related to infrastructure development.
NU Parent & Other Companies
:
The segment recorded net expenses of $5.2 million in the
quarter compared with gains of $3.3 million in the prior-year
quarter, including after-tax expenses associated with the NSTAR
merger.
Financial Update
As of December 31, 2011, Northeast Utilities had cash and cash
equivalents of $6.6 million compared with $23.4 million as of
December 31, 2010.
Cash generated from operations for the twelve months ended
December 31, 2011 was $970.4 million, lower than $1,093.5 million
in the year-ago comparable period. Capital expenditure for the
period increased to $1,076.7 million, up from $954.5 million spent
in the comparable period last year.
Peer Comparison
Northeast Utilities' closest peer
NiSource Inc.
(
NI
) posted net operating earnings of 32 cents per share in the fourth
quarter of 2011, falling short of the Zacks Consensus Estimate of
35 cents and the year-ago quarter operating earnings of 33 cents
per share.
Gross revenue during the quarter declined 13% year over year to
$1,450.7 million from $1,667.6 million. The decline in revenue was
mainly due to lower contribution from the
Gas Distribution
segment, which decreased 24.9%, offset by 4.1% growth in
Electric Operations
and 1.4% growth in the
Gas Transportation
and Storage
segment. Reported quarter revenue missed the Zacks Consensus
Estimate of $1,607 million.
Our View
We expect that Northeast Utilities will achieve good results
from its continued cost - control efforts and increase in
distribution rates. The company is also poised to benefit from
combined operations with NSTAR, which should boost both its top and
bottom lines.
We currently retain a Zacks #3 Rank on Northeast Utilities,
which translates into a short-term Hold recommendation. Based in
Hartford, Connecticut, Northeast Utilities engages in the energy
delivery business for residential, commercial, and industrial
customers.
NISOURCE INC (
NI
): Free Stock Analysis Report
NSTAR (
NST
): Free Stock Analysis Report
NORTHEAST UTIL (
NU
): Free Stock Analysis Report
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