Electricity and natural gas company
Xcel Energy Inc.
) reported its fourth quarter and fiscal 2011 year earnings. During
the quarter, operating and GAAP earnings were 29 cents per share, a
penny below the Zacks Consensus Estimate and both were in-line with
the earnings of the year-ago period.
During fiscal 2011, the company reported pro forma and GAAP EPS
of $1.72, above the Zacks Consensus Estimate of $1.69. However, in
fiscal 2010 pro forma EPS was $1.61 and GAAP EPS was $1.62.
The earnings for fiscal 2011 met the company's expectation and
were in the upper half of its guidance range of $1.65-$1.75. The
results reflect higher electric margins due to weather and rate
increases in various states. However, these were partially offset
by expected increases in operating and maintenance expenses,
depreciation, interest expense and property taxes.
Xcel Energy clocked total revenue of $2.57 billion in the
reported quarter, a marginal increase of 0.05% year over year.
Reported quarter revenue was, however, lower than the Zacks
Consensus Estimate of $2.8 billion.
Revenue in the fiscal-year period was $10.7 billion, up 3.3%
year over year but below the Zacks Consensus Estimate of $10.9
Revenue from this segment increased to $2.0 billion from $1.9
billion in the year-ago period.
Segment sales were largely impacted by fluctuating natural gas,
coal and uranium prices used in electricity generation. However,
the fuel recovery mechanism, which allows the company to recover
current expenses, offset the effect to some extent.
Revenue at this segment decreased by 2.2% to $560.1 million from
$572.4 million in the year-ago period.
Segment revenue in the reported quarter was $19.5 million versus
$19.9 million in the year-ago period, reflecting a nominal decline
In fiscal 2011, the company exceeded its energy efficiency and
conservation program targets. Despite severe weather across service
territory during second half of 2011, the company provided
excellent customer service and reliability.
Total operating expenses during the quarter declined by 0.9% to
$2.22 billion from $2.24 billion in the year-ago quarter. During
the fiscal year, total operating expenses were up 2.1% year over
year to $8.9 billion due to capital investment in Xcel Energy's
Despite the increase in operating expenses in fiscal 2011, the
company believes that the recent decision of the D.C. Circuit Court
to stay the Cross-State Air Pollution Rule will provide it more
time to comply with the rule in a cost-effective manner in Texas.
As a result, this will prevent its customers from being burdened by
significant cost increases and avoid potential reliability
Electric fuel and purchased power expenses was $920.3 million,
down 0.5% y/y. Operating income accordingly increased by 6.7% year
over year to $344.0 million from $322.4 million reported in the
Total interest charges and financing costs at the end of the
fourth quarter 2011 rose 4.8% to $145.8 million from $139.1 million
at the end of the fourth quarter 2010. The increase reflects higher
long-term debt levels necessary to fund investments in utility
operations, which were partially offset by lower interest
Long-term debts of the company as of December 31, 2011 were $8.8
billion while the debt-to-capital ratio at the end of the quarter
During 2011, the company issued three series of bonds
aggregating $700 million, which were utilized for various
Xcel Energy expects its 2012 earnings to be in the lower half of
the guidance range of $1.75-$1.85 per share. The guidance assumes
normal weather pattern in 2012.
The company guides weather-adjusted retail electric utility
sales to grow in the range of 0.5% - 1% in 2012, while the
weather-adjusted retail firm natural gas sales are expected to
remain relatively flat year over year.
Operating and maintenance expenses of the company are estimated
to increase approximately in the range of 1% - 3% year over year
while depreciation expense is projected to increase in a range of
$60 million - $70 million in 2012.
The company expects interest expense to be relatively flat in
At the Peer
One of the company's peers,
American Electric Power Company Inc.
) reported its fourth quarter and fiscal 2011 results. In the
reported quarter, the company clocked ongoing earnings of 40 cents
per share, in line with the Zacks Consensus Estimate. Quarterly
revenue at American Electric was $3.4 billion, flat versus the
Zacks Consensus Estimate.
Xcel Energy offers a comprehensive portfolio of energy-related
products and services in the United States, with operations in 8
Western and Midwestern states. We like the continued growth in
Xcel's renewable energy portfolio and the development of its
transmission line projects. Furthermore, the company aims to
improve regulatory recovery by adopting multi-year rate plans in
all its jurisdictions. However, we do not find any near-term
catalyst, thus leaving little room for further upside. Xcel Energy
currently retains a Zacks # 3 Rank, which translates into a
short-term Hold rating. We have a long-term neutral recommendation
on the stock.
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