Four blue chip electric utilities reported earnings this morning, and profits were down at all four. Earnings were released from Dominion Resources, Inc. (D), American Electric Power Company (AEP), Xcel Energy Inc. (XEL) and Entergy Corp. (ETR). Earnings declines ranged from 4% to 9%, and were attributed to a variety of factors, from decreased demand to higher operating costs.
Specifically, Dominion (D) reported earnings that included EPS of $0.29 for the first quarter, compared with EPS of $0.42 in the same period a year ago. American Electric Power (AEP) reported earnings that included EPS of $0.72 for the quarter, compared with EPS of $0.89 a year ago. Xcel (XEL) posted earnings per share of $0.36, compared with EPS of $0.38 a year ago. Entergy (ETR) reported EPS of $1.12, compared with $1.20 in 2009.
Dominion is shedding its commodity exposure, while increasing its role in the regulated market. In March the company announced that it was selling virtually all its assets in the Marcellus shale play to a subsidiary of Consol Energy (CNX) for about $3.5 billion. Dominion wants to reduce its commodity risk exposure to zero and focus instead on natural gas transportation and regulated electricity sales. The company affirmed its full-year guidance for operating earnings of $3.20-$3.40/share. Dominion expects operating earnings for the second quarter to fall below the same period a year ago. Lower margins for merchant power generation continue to weigh down results.
AEP’s earnings were stung by the dilutive effect of a secondary share offering of about 71 million new shares in 2009. The impact totaled $0.13/share, which still would not have pulled AEP even with last year’s earnings. Residential sales were up, mostly because of colder weather, but industrial sales remain down slightly and commerical sales are still “struggling”. The company is keeping its 2010 full-year EPS guidance at $2.80-$3.20, based on its success at reducing costs.
Xcel Energy came closest to matching its year-ago earnings, and actually exceeded last year’s operating earnings by $0.04/share. The company received some favorable rate case rulings and interim rates that helped margins. Xcel affirmed 2010 EPS guidance of $1.55-$1.65.
On operational earnings, Entergy also posted an EPS gain of $0.04 year-over-year, and beat analysts’ expectations of $1.32 by a penny. Entergy made money the old-fashioned way — the sold more product. Sales rose on colder weather, although higher operating costs weighed on operating profits. Industrial sales grew 7.3% in the quarter, reflecting increased demand from chemicals, pulp and paper, and metals customers.
Entergy lowered its full-year EPS guidance from $6.15-$6.95 to $5.95-$6.80, due to the scrapping of its plan to spin off its non-nuclear facilities and its operations into two new companies. The company announced earlier this month that it would write down $0.40-$0.45/share for costs to date of the failed spin-offs.
Regulated utilities are back to their tried-and-true boring business of making a fair, guaranteed profit. They may not be as exciting as the financial sector, but a little boring is not so bad these days.
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