Questar Corporation (STR), a natural gas-focused energy company, reported adjusted third-quarter earnings of 22 cents per share, beating the Zacks Consensus Estimate by 4 cents. The bottom line was also higher than the year-ago quarter level of 19 cents per share. Improvement in almost all the business segments aided the results, in addition to a substantial decline in operating expenses.
Questar reported third-quarter revenues of $157.9 million, up about 5.6% from a year ago. However, quarterly revenues failed to meet the Zacks Consensus Estimate of $289 million. Lower liquid linked sales and realizations from the Wexpro segment led to the miss.
Segment Analysis
Questar Gas: The segment generated $100.7 million in revenues, up 12.6% from the prior-year quarter, owing to higher natural gas sales and better realizations. The segment reported operating loss of $9.4 million, narrower than the year-ago quarter loss of $11.2 million.
As of Sep 30, 2014, Questar Gas served 954,800 customers, up 1.7% from the year-ago quarter.
Wexpro: Segment revenues decreased 28.8% year over year to $9.4 million in the quarter. Lower liquid realizations led to the decline. However, segmental operating income from continuing operations increased to $47.2 million from $40.7 million in the prior-year quarter on the back of higher volumes and better natural gas realizations.
Quarterly production of natural gas increased 15.8% to 15.4 billion cubic feet (Bcf) from 13.3 Bcf.
Questar Pipeline: The segment reported revenues of $47.3 million against $47 million in the comparable quarter last year. Marginal improvement in transportation and storage volumes aided the result. Income from continuing operations came in at $28.8 million versus a loss of $52.6 million reported in the third quarter of 2013.
Total natural gas transportation volumes were $207.2 million decatherms, compared with 208.5 million decatherms in the third quarter of 2013.
Expense Summary
The general and administrative expenses for the quarter increased 6.6% from the prior-year period to $26 million, while depreciation, depletion and amortization costs rose 7.2% to $50.8 million. Total operating expense of $90.5 million marked a substantial decline from the year-ago period level of $169 million owing to an absence of abandonment and impairment charges in the reported quarter.
Financials
As of Sep 30, 2014, Questar had long-term debt (including current portion) of $1,284.3 million, with a debt-to-capitalization ratio of 50.1%.
Guidance
For 2014, Questar raised its earnings guidance to $1.25–$1.30 per diluted share from the earlier range of $1.18–$1.28. A robust 2014 performance to date has led to the increase.
Zacks Rank
Questar currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Better-ranked players from the broader utilities sector like IdaCorp, Inc. (IDA), WGL Holdings Inc. (WGL) and Southern Company (SO) are worth consideration. All these stocks sport a Zacks Rank #1 (Strong Buy).
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