Entergy Sets Robust Q1 Outlook, Shares Rise - Analyst Blog

Entergy Corporation ETR provided a robust outlook for the first quarter 2014 as well as boosted its 2014 bottom line expectations resulting from higher wholesale electricity prices owing to cold winter weather and limitations of pipeline infrastructure in the Northeast US. Investors reacted positively to the news pushing stock prices by 1.4% to close at $71.97 on Apr 15, 2014.

This utility company now expects its first quarter operational earnings to be about $2.28 per share, exceeding the Zacks Consensus Estimate of $1.17 and significantly higher than the year-ago profit of 94 cents. On an as-reported basis, Entergy expects $2.23 of profit for the first quarter.

For 2014, the company raised its bottom line outlook to $5.55-$6.75 from its previous expectation of $4.60-$5.40.

Entergy, whose fourth quarter 2013 earnings fell 41.9% year over year primarily due to higher total operating expenses and an increase in shares outstanding, now registered improved results in the first quarter in both of its divisions – Entergy Wholesale Commodities and Utility.

Entergy is well positioned through its geographically-diversified mix of regulated and merchant operations. The company's regulated assets are located primarily in Arkansas, Louisiana, Mississippi and Texas, and its merchant generation assets are situated mostly in New York, Massachusetts and Michigan. This insulates Entergy from regulatory bottlenecks and power-price volatility in any particular region, helping the company to achieve its targeted annual compound earnings growth of 6% in the next five years.

The company is slated to report its first quarter earnings on Apr 24, before the opening bell. We remain optimistic for Entergy's cost-control initiatives that are expected to boost its upcoming margins and improve operational efficiency.

The company plans to realign its operations to optimize its resource-utilization in order to meet the changing business needs. Entergy has set forth a cost saving target in the range of $200 million to $250 million via its human capital management program to be implemented by 2015 end.

Entergy currently has a Zacks Rank #2 (Buy). Some better-ranked stocks in the same industry include Public Service Enterprise Group Inc. PEG, NRG Energy, Inc. NRG and NRG Yield, Inc. NYLD. All these stocks sport a Zacks Rank #1 (Strong Buy).