Earnings Preview: Northeast Utilities - Analyst Blog
October 26 2012 - 2:04PM
Zacks
Northeast Utilities (NU), a public utility
holding company, is scheduled to report its third-quarter 2012
financial results on October 29, 2012.
Second-Quarter Recap
Northeast’s second-quarter 2012 pro-forma earnings per share were
45 cents, which is in line with the Zacks Consensus Estimate, but
surpassed the year-ago earnings by a penny. The rise in earnings
was due to continued investments in the company’s electric
transmission systems, but partially offset by lower retail sales
from each of its business segments and higher miscellaneous
costs.
In second-quarter 2012, GAAP earnings per share were 15 cents
compared with 44 cents reported in the year-ago quarter.
The variance between pro forma and GAAP earnings resulted from
after-tax charges of 30 cents related to the merger of Northeast
and NSTAR.
In second-quarter 2012, Northeast reported operating revenue of
$1,629.0 million, up 55.4% from the year-ago figure of $1,048.0
million. Quarterly revenue beats the Zacks Consensus Estimate of
$1,503.0 million.
Zacks Consensus
The Zacks Consensus Estimate for third-quarter 2012 is 65 cents per
share, up from 51 cents per share reported in the prior-year
quarter. Currently, the Zacks Consensus Estimate for the company’s
earnings per share range between 62 cents and 70 cents.
For full-year 2012, the Zacks Consensus Estimate stands at $2.28
per share, lower than the prior-year earnings of $2.38 per share.
The current Zacks Consensus Estimate for full-year 2012 ranges from
$2.25 to $2.35 per share.
Estimate Revisions Trend
Agreement
For third-quarter 2012, we have observed that 2 estimates have
moved upwards while no downward revisions were witnessed in the
last 7 days. However, we have noticed 2 upward and 1 downward
movements in the last 30 days.
For full-year 2012, there were no estimate revisions in the last 7
days. As far as last 30 days estimates revisions are concerned, 3
estimates moved upwards whereas 2 estimates went downwards.
Magnitude
In the last 7 days, the Zacks Consensus Estimate for third-quarter
2012 earnings remained unchanged at 65 cents per share. However,
quarterly earnings estimate decreased by a penny to 65 cents from
66 cents in the last 30 days.
For full-year 2012, earnings per share as per the Zacks Consensus
Estimate remained unchanged at $2.28 in the last 7 days and
decreased by a cent to $2.28 from $2.29 in the last 30 days.
Surprise History
With respect to earnings surprises, Northeast Utilities has topped
the Zacks Consensus Estimate in two quarters out of the last four
quarters. Over the last four quarters, the surprise ranges from
-17.65% to 7.25% with an average of -5.89%.
Our Recommendation
Northeast Utilities strongly follows organic as well as inorganic
growth strategy. As a result of merger with NSTAR, the company has
become one of the leading utility providers in the U.S. This merged
entity continues to get benefit from increased scale of operations
and a wide customer base, which subsequently enables it to achieve
higher end of earnings growth in the near future.
As far as organic growth projects are concerned, the company
intends to invest $1.7 billion under its full-year 2012
infrastructure spending programs for expansion and development of
several major projects. We believe these projects will provide
Northeast attractive earnings and cash flow growth over the coming
couple of years.
However, we are skeptical about strict regulations, over-dependence
on transmission and distribution businesses, and risks associated
with delay and cancellation of several key projects.
Northeast Utilities currently has short-term Zacks #3 Rank (Hold
rating).
Hartford, Connecticut and Boston, Massachusetts-based Northeast
Utilities is a public utility holding company, which provides
energy delivery services to residential, commercial and industrial
customers in Connecticut, New Hampshire and Massachusetts. The
company engages in the purchase, delivery, and sale of
electricity.
With a market capitalization of $12.15 billion, Northeast has
6,063 full time employees. The company’s closest peer is
NiSource Inc. (NI).
NISOURCE INC (NI): Free Stock Analysis Report
NORTHEAST UTIL (NU): Free Stock Analysis Report
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