Xcel Energy Beats by a Penny – Analyst Blog

Electricity and natural gas company Xcel Energy Inc. (XEL) announced its operating earnings for the second-quarter 2010 of 29 cents per share versus 25 cents per share in the year-ago quarter, reflecting a growth of 16%. The results of the company were higher than the Zacks Consensus Estimate of 28 cents per share by a penny.

Xcel Energy’s GAAP earnings for the second quarter of 2010 were 30 cents per share versus 25 cents per share recorded in the year-ago period. The difference between GAAP and operating earnings during the second quarter was owing to one-time gain of 1 cent per share from discontinued operations.

Total Revenue

Xcel Energy reported total revenue of $2,307.8 million for the second-quarter 2010 versus $2,016.1 million in the year-ago period, reflecting a growth of 14.5%. The year-over-year growth was driven by higher contributions from Electric and Other segments; the results were marginally impacted by lower revenues from the Natural Gas segment.

The second-quarter results of the company came in ahead of the Zacks Consensus Estimate of $2,140 million by $167.8 million.

Segment-wise Revenue

Electric: The revenue contribution from this segment during the second-quarter 2010 increased 17.7% to $2,040.7 million from $1,733.7 million in the year-ago period.

Other: Segment revenue in the reported quarter was $17.7 million versus $16.5 million in the year-ago period, reflecting a growth of 7.0%.

Natural Gas: Revenue at this segment dipped 6.2% to $249.4 million from $265.9 million a year ago.

Operational Update

Total operating expenses of Excel Energy climbed 14.2% during the second-quarter 2010 to $1,982.5 million from $1,736.7 million in the year-ago quarter. However, operating expenses, as a percentage of total revenue, declined year over year, which benefited the operating results of the company.

Operating income of the company during the second-quarter 2010 was $325.3 million versus $279.4 million in the year-ago period, manifesting an improvement of 16.5%.

Interest expenses at the end of second-quarter 2010 increased by $2.2 million to $141.5 million from $139.3 million in the year-ago period. The increase in expense was mainly due to higher long-term debt levels to fund investment in utility operations, partially mitigated by lower interest rates.

Financial Update

Xcel Energy ended the quarter with a total debt of $9.1 billion and total debt-to-capitalization of 55%, compared with $8.9 billion of total debt in the year-ago period.

In May 2010, Xcel Energy issued 4.7%, $500 million of unsecured debt with a 10-year maturity. During the remaining period of 2010, the company and its subsidiaries plan to raise $975 million of long-term debt and might issue $400 million of equity either in 2010 or in 2011.

Dividend

On May 19, 2010, the board of directors of Xcel Energy raised the quarterly dividend rate of the company to 25.25 cents per share from 24.50 cents. The dividend was paid on July 15, 2010, to shareholders of record on June 24, 2010.

Guidance

Xcel Energy reaffirmed its earnings guidance for 2010 in the range of $1.55–$1.65 per share. The guidance assumes normal weather pattern for the rest of the year. The guidance also anticipates the revenue to increase in 2010 due to the full year impact of 2009 electric rate increases in Colorado, Texas and New Mexico, along with the 2010 electric rate increase in Colorado.

Xcel Energy guides weather-adjusted retail electric utility sales to grow approximately 1% in 2010. The company also expects weather-adjusted retail firm natural gas sales to increase in the 0–1% range.

Xcel Energy projects operating and maintenance expenses in 2010 to increase in the $115–$135 million range. Depreciation expense is projected to increase in a range of $35 million to $45 million in 2010. Interest expense is likewise projected to increase in the $20 million to $30 million range.

Our View

We appreciate the initiatives taken by Xcel Energy to increase shareholder value through consistently increasing dividend payments rates. We believe the quarterly dividend increment is in sync with the company’s long-term policy of an annualized 2% to 4% dividend spike.

We retain a short-term Zacks #3 Rank (Hold) and a longer-term Neutral recommendation on the stock.

Based in Minneapolis, Minnesota, Xcel Energy is a U.S. electricity and natural gas company, with operations in eight Western and Midwestern states.
 
XCEL ENERGY INC (XEL): Free Stock Analysis Report
 
Zacks Investment Research
July 29, 2010 | Filed Under Analyst Opinions 

Comments

Leave a Reply