A resilient DTE Energy Company (DTE) clocked operating earnings per share of 65 cents for the second quarter of 2011 surpassing the Zacks Consensus estimate of 51 cents. The company also beat the prior-year quarterly earnings of 39 cents.
The Michigan-based energy company showing resilience in its business model posted strong numbers when its service area Michigan's unemployment rate climbed for the second straight month to 10.5% in June 2011.
The variance in EPS year over year primarily resulted from higher earnings at Energy Trading and Detroit Edison. This was partially offset by lower earnings at Power & Industrial Projects.
On a reported basis, including one-time items, earnings were 51 cents in the year-ago quarter compared to $1.19 in the reported quarter. In the reported quarter the variance between operating and reported earnings per share is 54-cent. This was due to a 52 cent income tax benefit on account of the enactment of the Michigan Corporate Income Tax in May 2011 and the related re-measurement of deferred tax assets and liabilities. Finally another 2 cents were deducted due to an asset retirement obligation.
Operating Statistics
Total revenue at DTE Energy at the end of the second quarter of 2011 was $2.03 billion versus $1.79 billion in the year-ago period, reflecting a growth of 13.2%. Reported quarter revenue also beat the Zacks Consensus Estimate of $1.81 billion.
Operating earnings were $111 million compared with year-ago operating earnings of $66 million. Operating earnings increased primarily due to solid results at Energy Trading and Detroit Edison, partially offset by lower earnings at Power & Industrial Projects. Overall DTE Energy reported net earnings of $202 million, compared with $86 million in the year-ago quarter.
Segment Update
Electric Utility: Segment earnings during the reported quarter were $103 million or 61 cents per share, up from $87 million or 51 cents in the prior-year quarter.
Gas Utility: The loss from this segment during the quarter under review was $3 million or 2 cents per share, which declined by $22 million from the prior-year quarter earnings.
Earnings in the year-ago period were $19 million or 11 cents.
Gas Storage and Pipelines: Segment profit increased by $4 million to $14 million or 9 cents per share from $10 million or 6 cents in the year-ago quarter.
Unconventional Gas Production: Segment loss narrowed marginally to $1 million or 1 cent per share from a loss of $2 million or 1 cent per share in the year-ago quarter.
Power and Industrial Projects: The segment posted a profit of $5 million or 3 cents per share, down from $22 million or 13 cents in the year-ago period.
Energy Trading: The segment posted a profit of $12 million or 7 cents per share, compared with a loss of $26 million or 15 cent per share in the prior-year quarter.
Corporate and Other: Earnings in the quarter were $72 million or 42 cents per share, compared with a loss of $24 million or 14 cents per share in the prior-year quarter.
Outlook
DTE Energy is a Detroit-based diversified energy company involved in the development and management of energy-related businesses and services nationwide. Its operating units include Detroit Edison, an electric utility serving 2.1 million customers in Southeastern Michigan, MichCon, a natural gas utility serving 1.2 million customers in Michigan and other non-utility, energy businesses focused on gas storage and pipelines, unconventional gas production, power and industrial projects, and energy trading.
Looking ahead, the company reiterated its 2011 earnings guidance range of $3.40–3.70 per share. The company targets achieving 5% to 6% growth in operating earnings over the long term, while providing attractive returns to its shareholders.
DTE Energy currently retains a Zacks #3 Rank (short-term Hold rating). We provide a long-term Neutral rating on the stock. In the near-term we would advise investors to focus on its Zacks #1 Rank (short-term Strong Buy rating) peers like Empire District Electric Company (EDE) and Huaneng Power International Inc. (HNP).
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