Energy utility TECO Energy Inc. (TE) announced its first-quarter 2011 operating earnings of 24 cents per share (or $51.7 million), which missed the Zacks Consensus Estimate of 30 cents. The results of the company were also lower than 34 cents per share ($72.9 million) reported in the year-ago quarter.
GAAP earnings in the quarter were 24 cents per share versus 26 cents per share in the first quarter of 2010.
Total Revenue
Total revenue at TECO Energy at the end of the first quarter was $796.1 million versus $912.3 million in the year-ago period, reflecting a decline of 12.7%. The year-over-year revenue fall was perpetrated by a 16.9% decline in Regulated Electric and Gas revenues, which was marginally offset by a 1.6% growth in Unregulated revenue.
The top line reported in the quarter also missed the Zacks Consensus Estimate of $926 million by a wide margin.
Quarterly Highlights
The company saw a 10.5% year-over-year decrease in total expenses during the quarter. However, as a percentage of total revenue, total expenses increased by 207 basis points over the prior year.
Lower revenue coupled with a relative increase in total expenses resulted in the year-over-year decline in income from operations. Operating income during the reported quarter decreased by 22.5% to $130.9 million from $168.4 million in the first quarter of 2010.
Interest charges decreased by 11.3% to $52.6 million from $59.3 million in the year-ago quarter.
Financial Update
Cash and cash equivalents of the company as of March 31, 2011, were $89.5 million, much lower than $232.0 million as of March 31, 2010.
The company incurred capital expenditure of $92.9 million, down $50.0 million from $142.9 million in the first quarter of 2010.
The company marginally lowered its debt levels during the reporting quarter. Long-term debt of the company as of March 31, 2011 was $3,070.3 million versus $3,148.1 million as of December 31, 2010.
Dividend
During the quarter the company increased its quarterly dividend to 21.5 cents per share from the existing level of 20.5 cents. The annualized dividend of TECO Energy will now total 85 cents per share, a 3.7% growth from the preceding annualized payout of 82 cents.
Guidance
TECO Energy maintained its earnings per share expectation for 2011 in a range of $1.25 to $1.40.
Tampa Electric, TECO's regulated electric operation, assuming normal weather expects lower year-over-year energy sale in 2011. In 2010, Tampa Electric benefited from an unusual weather pattern, which added between $30 million and $40 million to pretax base revenue.
The company's coal production wing, TECO Coal has contracted its expected 2011 sales of 8.5–9.0 million tons, at an average contracted selling price across all products of $88 per ton. The cost of production per ton of coal is expected between $74 and $78 during 2011.
At the Peer
NextEra Energy Inc. (NEE), which competes with TECO Energy, announced operating earnings for the first quarter 2011 of 94 cents per share, at par with the year-ago quarter. NextEra Energy’s earnings per share were below the Zacks Consensus of 96 cents per share.
NextEra Energy's total operating revenue for first-quarter 2011 was $3.1 billion, down 13.5% from $3.6 billion reported in the year-ago period. Reported quarter revenue also missed the Zacks Consensus Estimate of $3.46 billion.
Our View
TECO Energy once again missed our expectation for both the top and bottom lines. Moreover, TECO Energy's two regulated units, Tampa Electric and People Gas, guided lower sales in 2011 due to weather and the situation in the housing market. However, we see a glimmer of hope with both Tampa Electric and People Gas recording customer growth of a respective 0.6% and 0.8% in the quarter.
Despite misses in recent quarters, we consider the long-term fundamentals of the company to be sound and, aided by a reviving Florida economy, expect TECO to achieve higher earnings and dividend growth over the next few years.
TECO Energy currently retains a Zacks #3 Rank (short-term Hold rating). We provide a long-term Neutral rating on the stock.
Based in Tampa, Florida, TECO Energy is involved in the generation, purchase, transmission, distribution, and sale of electric energy in Florida.
NEXTERA ENERGY (NEE): Free Stock Analysis Report
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