Frigid Winter Drives Entergy Earnings Higher - Analyst Blog

Entergy Corporation ETR posted robust first-quarter 2014 earnings. Its operational earnings came in at $2.29 per share in the quarter, beating the Zacks Consensus Estimate by 8.5%. Quarterly earnings increased a considerable 143.6% year over year on the back of higher wholesale electricity prices owing to a frigid winter and pipeline infrastructure constraints in the Northeast U.S.

Excluding special items of 5 cents, the company's quarterly GAAP earnings were $2.24 per share. The result was up 148.9% year over year.

Operational Results

In the quarter under review, Entergy's total operating revenues of $3,208.8 million surpassed the Zacks Consensus Estimate by 15.5%. Reported revenues surged 23.0% year over year, primarily due to improvement in Electric (up 14.2% year over year), Natural Gas (up 46.7% year over year) and Competitive business (up 49.1% year over year) sales.

Segment Results

Utility: The segment's quarterly earnings were $201.1 million on an as-reported basis and $203.4 million on an operational basis compared with $123.5 million on as-reported and $129.8 million on operational in first-quarter 2013. The year-over-year increase was largely due to higher revenues as well as lower non-fuel operation and maintenance expenses.

Entergy Wholesale Commodities: Entergy Wholesale Commodities' as-reported earnings were $241.9 million while operational earnings were $248.5 million for first-quarter 2014. During the corresponding quarter last year, earnings on an as-reported as well as operational basis were merely $82.1 million. The improvement in operational earnings was primarily due to a rise in other income and lower income tax expenses.

Parent & Other: In the reported quarter, the unit incurred a loss of $41.9 million on both as-reported and an operational basis. This compares to a loss of $44.2 million on an as-reported and operational basis in the year-ago quarter.

Financial Condition

As of Mar 31, 2014, Entergy's total cash and cash equivalents were $908 million compared with $263 million at the end of first quarter 2013.

Long-term debt as of Mar 31, 2014 totaled $12.2 billion versus $12.1 billion as of Dec 31, 2013.

Total operating cash flow was $767 million versus $544 billion in the year-ago comparable period.

Entergy's capital expenditure was $483.4 million in the first quarter compared with $631.9 million a year ago.

Guidance

Entergy recently boosted its 2014 earnings guidance to the range of $5.55–$6.75 per share on an operational basis.

Zacks Rank

We appreciate Entergy's steady effort towards reducing debt, thereby improving future margins. In addition, the company's stable cash position and strong cash-generating ability will help to meet the fund requirements for operational expansion.  

Entergy currently has a Zacks Rank #1 (Strong Buy). Other companies in the utility industry with a comparable Zacks Rank include CPFL Energia S.A. CPL, NRG Energy, Inc. NRG and NRG Yield, Inc. NYLD.