Integrys Energy Group, Inc. (TEG) reported second quarter 2013 pro forma earnings of 45 cents per share, up 66.7% from the year-ago quarter. Earnings also breezed past the Zacks Consensus Estimate of 32 cents by 40.6%.
The upside was due to healthy margins at the natural gas utility segment and positive impact from decoupling mechanisms related to People Gas, North Shore Gas and Minnesota Energy Resources units.
GAAP loss was 7 cents per share in the reported quarter compared with earnings of 62 cents in the second quarter of 2012. The difference between the quarterly GAAP loss and pro forma earnings was due to a 51 cent loss from derivative as well as inventory accounting activities and a 1 cent loss from discontinued operations.
Total Revenue
Integrys Energy's total revenue surged 32.9% year over year to $1,116.0 million. Reported revenues also outstripped the Zacks Consensus Estimate by 33.2%.
The top line upswing reflects favorable sales from the company’s regulated as well as non-regulated business divisions.
Operating Results
Integrys Energy’s total gas retail throughput volumes from the regulated segment rose 40.9% year over year to 332.7 therms. Electric sales volumes however witnessed a marginal fall to 3,942.1 Kilowatt-hours (“Kwh”) from 3,950.9 Kwh in the prior-year period.
In the non-regulated segment, retail electric sales volume in the second quarter was 4,838.1 million Kwh versus 3,082.7 million Kwh in the comparable year-ago period. Retail natural gas volume was up 73.4% to 37.1 billion cubic feet from the year-ago quarter.
Integrys Energy’s cost pressure escalated with operating expenses rising 49.2% year over year to $1,122.9 million. Non-regulated cost of sales spiraled 132.9% year over year to $447.9 million in the second quarter while fuel, gas and purchased expenses increased 31% year-over-year.
The rise in cost completely offset the revenue upturn, leading to Integrys Energy incurring an operating loss of $6.9 million in the reported quarter.
Financial Update
Integrys Energy’s cash and cash equivalents were $20.2 million as of Jun 30, 2013 compared with $27.4 million as of Dec 31, 2012. As of Jun 30, 2013, long-term debt was $1,886.2 million compared with $1,931.7 million as of Dec 31, 2012.
Net cash generated from operating activities in the first half of 2013 was $448.0 million compared with $431.9 million in the first half of 2012.
Capital expenditure at the end of Jun 30, 2013 was $153.1 million versus $126.2 million at the end of Jun 30, 2012.
Guidance for 2013
Integrys Energy narrowed its 2013 pro forma earnings in the band of $3.35-$3.60 per share from the previous range of $3.25-$3.60 per share. The company estimates GAAP earnings for 2013 in the range of $3.41-$3.66 per share.
Other Utility Company Releases
TECO Energy Inc. (TE) reported second quarter 2013 earnings of 25 cents per share lagging the Zacks Consensus Estimate by 3.8%.
Xcel Energy Inc. (XEL) reported pro forma earnings of 44 cents per share beating the Zacks Consensus Estimate by 15.8%.
CenterPoint Energy Inc. (CNP) posted adjusted earnings per share of 30 cents surpassing the Zacks Consensus Estimate of 27 cents.
Our View
Integrys Energy retained it successful earnings run by reporting substantial bottom line surprise in the second quarter. The improving gas price is expected to continue to fetch lucrative returns for the company.
Integrys Energy’s large-scale modernization endeavors like the recently announced 5-year System Modernization and Reliability Project will strengthen its service reliability, thereby leading to consumer retention in the future.
In addition, given the positive U.S. auto market fundamentals, the company’s efforts to expand its compressed natural gas fueling network will certainly diversify growth opportunities. Integrys Energy currently carries a Zacks Rank #2 (Buy).
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