Westar Beats on Both Counts - Analyst Blog

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Westar Energy Inc. ( WR ) announced fourth quarter pro forma earnings of 36 cents per share, up 125% from year-ago earnings of 16 cents. The company's earnings significantly topped the Zacks Consensus Estimate by 80%. An increase in returns from the retail business led to the upsurge.

Pro forma and GAAP earnings were the same due to the absence of one-time items.

For 2012, Westar Energy reported adjusted earnings of $2.15 per share compared with adjusted earnings $1.81 in 2011. Yearly earnings outpaced the Zacks Consensus Estimate by 8.6%.

Earnings in 2012 outperformed due to the rise in retail revenues, lower depreciation expense and benefits accrued from corporate-owned life insurance partially offset by higher operating cost.

2012 GAAP and adjusted earnings were similar owing to the absence of one-time items.

Revenue

Total revenue for the fourth quarter was $523.8 million, up 7.7% from $486.2 million in the year-ago quarter. The top line upswing resulted from increase in residential, commercial as well as industrial revenues aided by a surge in transmission returns.

The top line for the quarter beat the Zacks Consensus Estimate by 4.14%.

In 2012, revenue was $2,261.5 million versus $2,171.0 million in 2011. 2012 revenue surpassed the Zacks Consensus Estimate by 1.4%.

Operating Highlights

Total operating costs for the quarter were $416.0 million compared with $413.6 million in the year-ago quarter due to a 17.5% and 4.2% increase in selling and administrative expenses as well as operating and maintenance expenses respectively, partially offset by a 4.8% fall in fuel and purchased power.

Income from operations for the quarter rose 48.5% to $107.8 million from $72.6 million in the prior-year period. The immense jump in revenue relative to the nominal cost escalation of 0.6% led to the expansion of profit.

Total operating costs for 2012 also climbed to $1,699.3 million from $1,658.6 million in 2011.

Interest expense for the fourth quarter was $44.5 million versus $41.8 million in the year-ago quarter.

Guidance

Westar Energy expects earnings in 2013 in the range of $2.00 to $2.15 per share.

Dividend Update

The company's Board of Directors hiked its quarterly dividend by 3% to 34 cents payable Apr 1, 2013 to shareholders of record as of Mar 11, 2013. The annual dividend also comes to $1.36 per share.

Other Utility Company Releases

The AES Corporation ( AES ) reported fourth quarter 2012 adjusted earnings per share of 32 cents, edging out the Zacks Consensus Estimate of 30 cents.

Edison International ( EIX ) reported adjusted earnings of $1.79 per share for the fourth quarter of 2012, beating the Zacks Consensus Estimate of $1.06.

CMS Energy Corporation ( CMS ) clocked earnings for the fourth quarter 2012 of 25 cents per share on both an adjusted and GAAP basis, beating the Zacks Consensus Estimate of 24 cents.

Our View

Westar Energy posted strong financial results in the fourth quarter 2012 with both the top and the bottom line outpacing our expectations. We anticipate the company's several pro-environment programs like Jeffery and La Cygne will immensely contribute to its profitability.

In renewables, the company stands to gain from the Prairie Wind joint venture. Furthermore, the Lawrence Energy Center project will fetch lucrative returns for Westar in the upcoming quarters.

However, pending rate case approval related to the transmission rider could be an overhang on Westar's operations. Presently, the company carries a Zacks Rank #3 (Hold).

Headquartered in Topeka, KS, Westar Energy is an electric utility engaged in the generation, transmission, and distribution of electricity in Kansas.



AES CORP (AES): Free Stock Analysis Report

CMS ENERGY (CMS): Free Stock Analysis Report

EDISON INTL (EIX): Free Stock Analysis Report

WESTAR ENERGY (WR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AES , CMS , EIX , WR

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