Integrys Energy Posts Mixed Numbers
Integrys Energy Group Inc. (TEG) reported adjusted earnings of 89 cents per share, declining 11% from the year-ago earnings of $1.00 per share. The earnings trailed the Zacks Consensus Estimate by 5.3%.
The decrease in earnings was due to lackluster performance from Integrys Energy Service business and rate case effects related to the company’s subsidiary, Wisconsin Public Service Corporation.
GAAP earnings were 86 cents in the reported quarter compared with 49 cents in the fourth quarter 2011. The difference between GAAP and pro forma earnings of 3 cents was due to a non-cash loss associated with derivative and inventory accounting activities.
In 2012, Integrys Energy’s adjusted earnings were $3.26 per share versus $3.34 per share in 2011. Earnings marginally fell short of the Zacks Consensus Estimate of $3.29 per share.
The company also reported yearly GAAP earnings of $3.55 per share, higher than the year-ago figure of $2.87 per share.
Total Revenue
Integrys Energy’s quarterly revenue was $1,197.2 million, up 6.2% from $1,127.3 million in the prior-year quarter. Revenue also beat the Zacks Consensus Estimate by 14%.
Utility segment revenue was $842.6 million in the reported quarter, falling 2% from $858.8 million in the year-ago period. This was on account of unfavorable returns from the wholesale as well as retail electric utility businesses owing to mild weather conditions, partially offset by positive rate changes in the natural gas business.
In 2012, the company’s top line plummeted 10.1% to $4,212.4 million from $4,685.9 million in the prior year. The 2012 top line also fell behind the Zacks Consensus Estimate by 13%.
Operating Highlights
In the reported quarter, Integrys Energy’s fuel, natural gas and power costs dropped 5.6% to $399.9 million from $423.7 million in year-ago quarter. Operating and maintenance costs, however, increased 6.7% year over year to $282.7 million in fourth quarter 2012. Total cost for the quarter was $1,078.4 million compared with $1,065.9 million in the year-ago quarter.
Operating income increased 93.5% to $118.8 million from $61.4 million in the year-ago quarter. The minimal cost increase offset by greater revenue upsurge led to higher profit.
Interest expense for the quarter remained flat at $30.2 million from the comparable year-ago period.
Financial Update
Cash and cash equivalents of Integrys Energy as of Dec 31, 2012 were $27.4 million, down from $28.1 million as of Dec 31, 2011. Long-term debt rose to $1,931.7 million from $1,845.0 million as of Dec 31, 2011.
Net cash generated from operating activities at the end of 2012 was $569.0 million versus $717.8 million in the corresponding period last year. Capital expenditure for the twelve-month period totaled $594.3 million, compared with $310.1 million in the year-ago period.
Guidance
Integrys Energy Group expects 2013 GAAP earnings in the range of $3.03–$3.53 per share. The regulated natural gas utility segment is expected to contribute in the range of $1.00–$1.35 per share while electric utility is estimated to record earnings in the band of $1.25–$1.33 per share.
The transmission segment is anticipated to provide earnings of 69 cents to 70 cents in 2013. Pro forma earnings for 2013 are expected in the range $3.05–$3.55 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.
Brookfield Infrastructure Partners L.P.'s (BIP) fourth-quarter 2012 operating earnings were 25 cents per unit, lower than the Zacks Consensus Estimate of 58 cents.
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
Integrys Energy posted mixed financial results for the fourth quarter 2012 with the top line beating our expectation while bottom line falling short. We anticipate Integrys Energy to derive significant benefits from the expected rise in natural gas prices. In addition, customer base expansion and advancement in the pipeline replacement projects are anticipated to act as tailwinds in the near term.
However, the Energy business could likely pose challenges given increased competition. Moreover, the company is expected to be under cost pressure from the modernization of its plants owing to a settlement with the Environmental Protection Agency (“EPA”).
Integrys Energy Group Inc. currently retains a Zacks Rank #3 (Hold). Based in Chicago, IL, the company is a diversified holding company providing products and services in both regulated and non-regulated energy markets, through its subsidiaries.
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