Resilient DTE Beats, Reaffirms

Zacks

A resilient DTE Energy Company (NYSE:DTE - News) clocked operating earnings per share of 65 cents for the second quarter of 2011 surpassing the Zacks Consensus estimate of 51 cents. The company also beat the prior-year quarterly earnings of 39 cents.

The Michigan-based energy company showing resilience in its business model posted strong numbers when its service area Michigan's unemployment rate climbed for the second straight month to 10.5% in June 2011.

The variance in EPS year over year primarily resulted from higher earnings at Energy Trading and Detroit Edison. This was partially offset by lower earnings at Power & Industrial Projects.

On a reported basis, including one-time items, earnings were 51 cents in the year-ago quarter compared to $1.19 in the reported quarter. In the reported quarter the variance between operating and reported earnings per share is 54-cent. This was due to a 52 cent income tax benefit on account of the enactment of the Michigan Corporate Income Tax in May 2011 and the related re-measurement of deferred tax assets and liabilities. Finally another 2 cents were deducted due to an asset retirement obligation.

Operating Statistics

Total revenue at DTE Energy at the end of the second quarter of 2011 was $2.03 billion versus $1.79 billion in the year-ago period, reflecting a growth of 13.2%. Reported quarter revenue also beat the Zacks Consensus Estimate of $1.81 billion.

Operating earnings were $111 million compared with year-ago operating earnings of $66 million. Operating earnings increased primarily due to solid results at Energy Trading and Detroit Edison, partially offset by lower earnings at Power & Industrial Projects. Overall DTE Energy reported net earnings of $202 million, compared with $86 million in the year-ago quarter.

Segment Update

Electric Utility: Segment earnings during the reported quarter were $103 million or 61 cents per share, up from $87 million or 51 cents in the prior-year quarter.

Gas Utility: The loss from this segment during the quarter under review was $3 million or 2 cents per share, which declined by $22 million from the prior-year quarter earnings.

Earnings in the year-ago period were $19 million or 11 cents.

Gas Storage and Pipelines: Segment profit increased by $4 million to $14 million or 9 cents per share from $10 million or 6 cents in the year-ago quarter.

Unconventional Gas Production: Segment loss narrowed marginally to $1 million or 1 cent per share from a loss of $2 million or 1 cent per share in the year-ago quarter.

Power and Industrial Projects: The segment posted a profit of $5 million or 3 cents per share, down from $22 million or 13 cents in the year-ago period.

Energy Trading: The segment posted a profit of $12 million or 7 cents per share, compared with a loss of $26 million or 15 cent per share in the prior-year quarter.

Corporate and Other: Earnings in the quarter were $72 million or 42 cents per share, compared with a loss of $24 million or 14 cents per share in the prior-year quarter.

Outlook

DTE Energy is a Detroit-based diversified energy company involved in the development and management of energy-related businesses and services nationwide. Its operating units include Detroit Edison, an electric utility serving 2.1 million customers in Southeastern Michigan, MichCon, a natural gas utility serving 1.2 million customers in Michigan and other non-utility, energy businesses focused on gas storage and pipelines, unconventional gas production, power and industrial projects, and energy trading.

Looking ahead, the company reiterated its 2011 earnings guidance range of $3.40–3.70 per share. The company targets achieving 5% to 6% growth in operating earnings over the long term, while providing attractive returns to its shareholders.

DTE Energy currently retains a Zacks #3 Rank (short-term Hold rating). We provide a long-term Neutral rating on the stock. In the near-term we would advise investors to focus on its Zacks #1 Rank (short-term Strong Buy rating) peers like Empire District Electric Company (NYSE:EDE - News) and Huaneng Power International Inc. (NYSE:HNP - News).

DTE ENERGY CO (DTE): Read the Full Research Report

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