Spectra Beats Consensus - Analyst Blog
May 03 2011 - 8:04AM
Zacks
Premier natural gas company Spectra Energy
Corp. (SE) reported better-than-expected first-quarter
2011 results owing to expansion projects that kick-started, higher
natural gas liquids (NGLs) prices and a stronger Canadian
dollar.
Earnings per share from continuing operations were 54 cents in
the reported quarter, fairly ahead of the Zacks Consensus Estimate
of 51 cents and higher than the year-earlier profit of 53
cents.
The company reported operating revenues of $1,612 million,
surpassing the Zacks Consensus Estimate of $1,611 million and
improving from the year-earlier level of $1,480 million.
Operational Analysis
U.S.Transmission:
The segment posted quarterly earnings before interest and taxes
(EBIT) of $279 million, compared with $247 million in the year-ago
quarter. Business expansion projects, including TEMAX/TIME III and
Algonquin East-to-West contributed to the segment’s profit.
Distribution: The segment reported a
14% year over year jump in its EBIT to reach $167 million. The
performance was aided by higher customer usage, a stronger Canadian
dollar, a hike in the number of residential customers as well as in
industrial usage due to encouraging natural gas prices.
Western CanadaTransmission
& Processing: The segment witnessed an EBIT of
$141 million, up more than 18% from the year-earlier level. The
increase over the prior-year quarter was driven by improved results
in the base gathering and processing business, coupled with a
stronger Canadian dollar.
Field Services: The segment’s EBIT of
$81 million decreased from the year-earlier level of $99 million,
primarily due to higher operating and maintenance costs.
During the quarter, the company produced NGLs of approximately
358 thousand barrels per day (MBbl/d), up a marginal 1% year over
year. Price of NGLs averaged $1.13 per gallon (up 3.7% year over
year), while crude oil averaged approximately $94.10 per barrel (up
more than 19% year over year).
Balance Sheet
As of March 31, 2011, Spectra Energy had long-term debt of
approximately $10,257 million with a debt-to-capitalization ratio
of 53.5% (versus 54.5% in the preceding quarter).
Outlook
With first-quarter results showing an improvement over the prior
base year, management remains optimistic about the company’s
performance going forward. With a market leading position,
diversified asset portfolio and strong investment opportunities, we
expect Spectra Energy to sustain its growth momentum.
However, the heavy debt-to-capitalization ratio serves as a
competitive disadvantage for the company. Spectra also faces strong
competition from its peer company, El Paso Corp.
(EP). Hence, we prefer to remain on the sidelines and maintain our
long-term Neutral recommendation. Spectra Energy holds a Zacks #3
Rank, which translates into a short-term Hold rating.
EL PASO CORP (EP): Free Stock Analysis Report
SPECTRA ENERGY (SE): Free Stock Analysis Report
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