DTE Energy Company (DTE) reported second quarter 2013 earnings per share of 62 cents, missing the Zacks Consensus Estimate of 79 cents by 21.5%. The bottom line also declined 28.7% year over year. The decline reflects unusually hot weather last year which was not seen this quarter.
Including asset impairment charges of 2 cents per share at Power and Industrial Projects, GAAP earnings reported by the company were 60 cents versus 86 cents in the year-ago quarter.
Operating Statistics
Total revenue at DTE Energy was $2.2 billion, up 10.5% year over year. The reported quarter’s revenue also comfortably surpassed the Zacks Consensus Estimate by $270 million.
Fuel, purchased power and gas expenses increased 34.9% year over year to $940 million. Operation and maintenance expenses were up 0.3% year over year to $705 million.
The increase in revenue could not offset rising operating expenses, thereby resulting in an operating income of $223 million, down 24.1% year over year.
Segment Update
DTE Electric: Segment earnings were $89 million or 51 cents per share, down from $127 million or 74 cents per share in the prior-year quarter.
DTE Gas: Segment profit was $8 million or 5 cents per share, up from $4 million or 2 cents per share in second quarter 2012.
Non-Utility Operations
Gas Storage and Pipelines: The segment generated profit of $16 million or 9 cents per share, down from $17 million or 10 cents per share in the year-ago quarter.
Power and Industrial Projects: The segment posted a profit of $11 million or approximately 6 cents per share, flat year over year.
Energy Trading: The segment posted a loss of $2 million or 1 cent per share versus a profit of $4 million or 2 cents per share in the prior-year period.
Corporate and Other: Loss in the quarter was $13 million or 8 cents per share versus a loss of 15 million or 7 cents per share a year ago.
Financial Update
As of Jun 30, 2013, cash and cash equivalents were $46 million, down from $65 million as of Dec 31, 2012. At the end of second quarter 2013, long-term debt, net of current portion, was $6.8 billion versus $7 billion at year-end 2012.
Guidance
The company maintained its earnings per share guidance for 2013 in the range of $3.90 to $4.20. For 2014, the company expects earnings per share in the range of $4.12 to $4.42. In the long term, the company forecasts earnings growth in the range of 5.0% to 6.0% driven by strong growth opportunities. The company expects capital expenditure of $2.2 billion in 2013.
Our Take
DTE Energy failed to meet both the parameters with respect to the Zacks Consensus Estimate. However, going forward, the company is confident of achieving its earnings target driven by its utility growth plan, a constructive regulatory structure and low-risk growth opportunities.
However, lower demand for electricity because of an unfavorable macro backdrop and a weak Michigan economy in particular keeps us concerned. DTE Energy presently retains a short-term Zacks Rank #3 (Hold).
However, stocks to look out for in the space are Companhia Paranaense de Energia (ELP), Integrys Energy Group, Inc. (TEG) and Calpine Corp. (CPN). While Companhia Paranaense de Energia and Integrys Energy Group carry a Zacks Rank #1 (Strong Buy), Calpine Corp. holds a Zacks Rank #2 (Buy).
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