TECO Energy, Inc.(TE) announced third-quarter 2014 operating earnings of 32 cents per share, missing Zacks Consensus Estimate by a penny. Earnings rose 6.7% from the year-ago figure.
According to GAAP, quarterly earnings were 4 cents per share compared with 29 cents per share in the year-ago comparable period.
Total Revenue
Total revenues at TECO Energy in the third quarter 2014 were $687.2 million, short of the Zacks Consensus Estimate of $853 million.
Total revenues in the reported quarter increased 7% year over year. The upside was attributable to higher revenues from regulated electric and gas operations.
Operational Highlights
Total expenses increased 8.2% year over year to $541.5 million. Rising cost resulted from higher regulated operations as well as other operations & maintenance charges.
Interest expenses in the quarter were $44.4 million, 8.6% higher than $40.9 million in the year-ago quarter.
Segment Details
Tampa Electric: Segment net income was $79.7 million, up from $50.6 million in the year-ago quarter. The upside can be attributed to a base rate settlement, a 1.6% expansion in the customer base as well as higher energy sales attributable to favorable weather and customer growth. However, higher operations and maintenance expenses were a partial dampener.
Peoples Gas: Segment net income was down 11.1% year over year to $4.8 million. The decline stemmed from higher non-fuel operations and maintenance expense, employee-related costs, depreciation and amortization charges and compensation to employees. These were partially offset by higher therm sales to commercial and industrial customers and 1.9% growth in the customer count.
Parent & Other: Cost from continuing operations in the reported quarter was $10.6 million compared with a cost of $9.8 million in the corresponding quarter of 2013.
Financial Update
Cash and cash equivalents as of Sep 30, 2014, were $72.7 million, down from $185.2 million as of Dec 31, 2013.
Capital expenditure in the reported quarter was $171.5 million, higher than $121.3 million spent in the third quarter of 2013.
Cash flow from operating activities in the third quarter 2014 was $245.2 million, up from $218.3 million during the prior-year period.
Guidance
TECO Energy narrowed its consolidated earnings per share guidance for 2014 to the band of $1.00–$1.05 from its previous guidance of 95 cents to $1.05.
Peoples Gas maintained its expectation to earn above the midpoint of its allowed Return on Equity (ROE) range of 9.75% to 11.75%. The segment expects to benefit from customer switching from other sources of fuel to natural gas.
Tampa Electric expects to earn toward the upper half of its authorized allowed ROE of 9.25% to 11.25%.This primarily is expected to be driven by the September rate case settlement and base revenues of $50.0 million in 2014.
Other Company Releases
CMS Energy Corp. (CMS) reported third-quarter 2014 adjusted earnings per share of 37 cents, lagging the Zacks Consensus Estimate of 41 cents by 9.8%.
Wisconsin Energy Corp. (WEC) posted third-quarter 2014 adjusted earnings of 57 cents per share, surpassing the Zacks Consensus Estimate by 11.8%.
Exelon Corp. (EXC) reported third-quarter 2014 operating earnings of 78 cents per share, surpassing the Zacks Consensus Estimate of 71 cents by 9.8%.
Our View
In the quarter under review, TECO Energy missed on both the top and bottom line. During the reported quarter, TECO Energy’s newly acquired subsidiary, New Mexico Gas Co., commenced operations in September, which incidentally reported a loss of $0.9 million. Closing of sale of TECO Coal is yet to take place which will burden TECO Energy’s margins by approximately $7.0 million.
Going forward, TECO Energy expects average customer growth of 1.6% at Tampa Electric and anticipates 2014 operations and maintenance expenses to be lower than the 2013 level.
New Mexico Gas Co. is expected to perform fairly for the rest of the current year. Though the spinning off of TECO Coal was a good move taken by the company, additional efforts will be required to boost its earnings.
TECO Energy currently carries a Zacks Rank #2 (Buy).
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