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ALLETE Misses on Earnings, Beats Rev - Analyst Blog

Posted: 11/4/2013 11:30:00 AM
Referenced Stocks: AEP;ALE;NYLD;UNS

ALLETE Inc. ( ALE ) reported third-quarter 2013 earnings of 63 cents per share, missing the Zacks Consensus Estimate of 73 cents by 13.7%.

On a year-over-year basis, the company's earnings decreased 19.2% due to higher operating and maintenance expenses, an increase in the share count, and a rise in interest expenses. A much cooler summer led to a lower demand for electricity.

Total Revenue

ALLETE posted revenues of $251.0 million, surpassing the Zacks Consensus Estimate by $2.0 million. The quarterly revenues were 0.9% higher than the year-ago figure.

A marginal improvement in revenues was primarily driven by higher sales volume to other power suppliers and non-regulated energy operations. These positives were partially offset by a decline in total retail and municipal sales volume.

Operational Highlights

In the quarter under review, the company's total electricity sales volume edged down 0.3% year over year to 3,347 Kilowatt-hours. A decline in sales was primarily due to a drop in residential, commercial, municipals and industrial figures.

ALLETE's total operating expenses climbed 4.6% year over year to $212.6 million. A rise in operating and maintenance expenses and costs of fuel and purchased power led to the cost escalation.

An increase in revenues was more than offset by a rise in operating expenses. The company's operating income dropped 15.8% year over year to $38.4 million.

The company's interest expenses were $12.7 million versus $12.3 million in the year-ago quarter.

Financial Update

ALLETE's cash and cash equivalents as of Sep 30, 2013 were $164.5 million versus $80.8 million as of Dec 31, 2012.

Long-term debt as of Sep 30, 2013 was $1,064.2 million compared with $933.6 million at year-end 2012.

During the first nine months of 2013, the company's cash from operating activities were $188.9 million versus $195.5 million in the year-ago comparable period.

In the first nine months of 2013, the company invested $186.4 million under its capital expenditure program.


ALLETE expects its full-year 2013 earnings to be on the lower half of the earlier reported guidance of $2.58 - $2.78 per share. The revision in guidance was primarily due to a delay in commencement of operations at the company's Essar Steel Minnesota project.

The company provided total capital expenditure guidance of $375.0 million for 2013. The company intends to invest a total of $1,740 million through 2017.

At the Peer

American Electric Power Company Inc. ( AEP ) reported third-quarter operating earnings of $1.10 per share, beating the Zacks Consensus Estimate by 1.9%. The quarterly figure improved 7.8% from the year-ago profit of $1.02 per share. This improved performance reflects positive returns from the investments made in the company's regulated operations.

Zacks Rank

ALLETE currently has a Zacks Rank #4 (Sell). However, other stocks from the industry that are presently performing well include NRG Yield, Inc. ( NYLD ) and UNS Energy Corporation ( UNS ), each with a Zacks Rank #1 (Strong Buy).

AMER ELEC PWR (AEP): Free Stock Analysis Report

ALLETE INC (ALE): Free Stock Analysis Report

NRG YIELD INC-A (NYLD): Free Stock Analysis Report

UNS ENERGY CORP (UNS): Free Stock Analysis Report

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