Northeast Utilities
(
NU
) reported third-quarter 2012 pro forma earnings per share of 70
cents, beating both the Zacks Consensus Estimate of 65 cents and
year-ago quarterly figure of 51 cents a share.
On a GAAP basis, the company's quarterly earnings per share were
66 cents versus 51 cents in the prior-year quarter. The variance
between pro forma and GAAP earnings were due to after-tax charges
of 4 cents related to the merger with NSTAR.
Total Revenue
Northeast Utilities reported quarterly operating revenue of
$1,861.5 million, up from $1,114.9 million in the year-ago
quarter. The year-over-year revenue ramp reflected strong
performance from the transmission segment due to the merger with
NSTAR. However, the company's quarterly revenue missed the Zacks
Consensus Estimate of $1,947.0 million.
Electric and Natural Gas Sales Volumes
Northeast Utilities' overall retail electric sales in the third
quarter of 2012 increased to 15,502 Gigawatt hours ("GWh") from
15,302 GWh in the year-ago quarter. The company's quarterly
natural gas sales marginally increased to 10,696 million cubic
feet ("MMcf") from 10,688 MMcf in the prior-year quarter.
Segmental Earnings
Electric Transmission:
This segment's quarterly earnings of $71.1 million improved
markedly by 71.3% from $41.5 million in the prior-year quarter.
Improvement in earnings reflected a streak of profitable
investments in transmission system undertaken by the company
including Greater Springfield Reliability Project and positive
impacts related to merger with high-profile NSTAR.
Electric Distribution and Generation:
Earnings from this segment totaled $150.7 million in
third-quarter 2012 compared with $58 million in the prior-year
quarter. This earnings upside was due to a rise in retail sales
and addition of results from NSTAR Electric distribution;
partially offset by higher pension costs, increase in health care
benefits related expenses and depreciation costs, and temperature
deviations.
Electric Utility Subsidiaries:
Connecticut Light and Power Company
's ("CL&P") quarterly earnings were $73.5 million, up from
$65.1 million in the year-ago quarter due to a rise in
transmission earnings.
NSTAR Electric
reported earnings of $106.5 million in the third quarter of 2012.
In the second and third quarter of 2012, the company reported
total earnings of $162.0 million.
In the third quarter of 2012,
Public Service Company of New Hampshire
earned $27.2 million compared with $25.7 million in the year-ago
quarter. Growth in quarterly earnings was driven by improved
transmission earnings.
Western Massachusetts Electric Company
's ("WMECO") quarterly earnings were $14.1 million, up from $8.4
million in the third quarter of 2011 due to an increase in
transmission earnings.
Natural Gas Distribution:
This segment consists of Yankee Gas Services Company and NSTAR
Gas Company. Previously, this segment had only Yankee Gas
Services Company. In the quarter under review, this segment
reported a loss of $4.4 million compared with a loss of $3.0
million in the prior-year quarter.
NU parent and other businesses:
This segment's quarterly earnings were $3.1 million versus a loss
of $5.9 million in the year-ago quarter. Increase in earnings was
primarily driven by a decline in interest expenses and positive
results related to addition with NSTAR Communications, Inc.
Operational Highlights
On the cost side, Northeast Utilities' total operating expenses
increased to $1.4 billion at the end of September 2012 from $0.9
billion at the end of the prior-year quarter. Higher fuel and
power costs, operations and maintenance expenses, and
depreciation costs were primarily responsible for the cost hike.
The company's operating income in the current quarter totaled
$412.9 million compared with $203.8 million in third-quarter
2011.
Northeast Utilities' quarterly interest expenses increased to
$90.4 million from $63.9 million in the year-ago quarter,
indicating rising long-term debt.
Financial Update
As of September 30, 2012, Northeast Utilities had cash and cash
equivalents of $73.4 million versus $6.6 million as of December
31, 2011.
In the first nine months of 2012, the company's cash flow from
operating activities was $796.0 million compared with $888.4
million in the year-ago comparable period.
Long-term debt as of September 30, 2012 was $6.7 billion, up from
$4.6 billion as of December 31, 2011.
Dividend Update
The board of shareholders trustees of Northeast Utilities
announced a regular common dividend of 34 cents, payable on
December 31, 2012, to the shareholders of record as of November
30, 2012.
Full-year 2012 Guidance
Northeast Utilities reported its full-year 2012 recurring
earnings guidance in the range of $2.25 to $2.30 per share.
Peer Comparison
Northeast Utilities' closest peer
NiSource Inc.
(
NI
) posted its third-quarter 2012 pro forma earnings per share of 5
cents, beating the Zacks Consensus Estimate by a penny. However,
quarterly earnings were lower than the year-ago figure of 11
cents per share due to increase in operating as well as interest
expenses.
The company's total revenue in the quarter under review declined
to $961.9 million from $1,023.8 million in the year-ago quarter.
Reported revenue lagged the Zacks Consensus Estimate of $1,076.0
million.
Our View
Northeast Utilities reported mixed results in the third quarter
of 2012. The company's earnings per share surpassed the Zacks
Consensus Estimate whereas revenue fell short of estimate.
Northeast Utilities strongly pursues organic and inorganic growth
strategy. As a result of merger with NSTAR, the company has
experienced positive operating and financial impacts in the third
quarter of 2012. We believe this merger continues to help the
company to increase its scale of operations and a wide customer
base, which will, in turn, subsequently enable it to achieve
higher end of earnings growth in the near future.
In case of the organic growth plans, Northeast Utilities intends
to invest $1.7 billion under its full-year 2012 infrastructure
spending programs for expansion and development of several major
projects. We believe these projects will provide the company
attractive earnings and cash flow growth over the forthcoming
years.
However, we are cautious about natural calamities, stringent
regulations, over-reliance on transmission and distribution
businesses, and risks associated with delay and cancellation of
several important projects.
Like most of the utility providers of the Southeast and
Mid-Atlantic states, and New England of the U.S., Northeast
Utilities' fourth-quarter and full-year 2012 financial and
operating results may be affected by Hurricane
Sandy.
Northeast Utilities currently has short-term Zacks #3 Rank (Hold
rating).
Hartford, Connecticut and Boston, Massachusetts-based Northeast
Utilities is a public utility holding company, which provides
energy delivery services to residential, commercial and
industrial customers in Connecticut, New Hampshire and
Massachusetts. The company engages in the purchase, delivery, and
sale of electricity. With a market capitalization of $12.41
billion, Northeast has 6,063 full time employees.
NISOURCE INC (NI): Free Stock Analysis Report
NORTHEAST UTIL (NU): Free Stock Analysis
Report
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