Energy utility TECO Energy Inc. (TE) is slated to release its third-quarter 2012 earnings results before the market open on November 1, 2012.
Second Quarter Performance
The company reported second-quarter profit of 34 cents per share, lower than the year-ago earnings of 36 cents per share. The earnings in the reported quarter were also below the Zacks Consensus Estimate of 37 cents.
The earnings underperformance was due to weather irregularities and the current downturn in coal markets, partially offset by favorable growth in the company’s Florida utilities owing to an increased customer base.
Teco Energy posted total revenue of $788.4 million in the second quarter of 2012, down 11% from $885.7 million in the year-ago quarter. This was due to a combined decline in the company’s regulated electric and gas sales as well as in the unregulated division.
Reported revenue widely missed the Zacks Consensus Estimate of $893 million.
Teco Energy lowered its earnings expectation for 2012 to $1.20–$1.30 per share from the prior forecast of $1.30–$1.40 per share. This downward revision is due to the negative effect of mild weather in the month of July.
However, under the new base rate system, the company’s natural gas business wing expects to earn returns near the middle of its equity range as the new rates make People Gas less exposed to weather sensitivities.
Teco Coal forecasts depressed sales volume for 2012 and projects sales to be in the range of 6.0 million tons to 6.3 million tons with an average selling price of $96 per ton.
The company anticipates cost of production to be in the range of $83 per ton to $87 per ton.
The Zacks Consensus Estimate for the third quarter 2012 is 38 cents per share, down an estimated 10.1% from 42 cents reported in the year-ago quarter. The current Zacks Consensus Estimate ranges between 25 cents per share and 44 cents per share.
The full year 2012 Zacks Consensus Estimate is $1.16, down a projected 8.4% from $1.27 reported in the previous year. The current Zacks Consensus Estimate ranges between $1.13 per share and $1.24 per share.
Estimate Revisions Trend
The past 30 days have seen 1 of 8 estimates declining for the third quarter, while none moved in the opposite direction. There were no changes in the quarterly estimates in the last 7 days.
For full year 2012, of the 6 available estimates, there have been 2 downward revisions in estimates, while none moved in the opposite direction, in the last 30 days. One estimate moved downwards in the prior 7 days, while none moved north.
The Zacks Consensus Estimate for the third quarter and for the full year remained unchanged in the last 7 days. However, estimates for the third quarter as well as for the full year moved down by 3 cents each, in the last 30 days.
With respect to earnings surprise, the company’s performance failed to measure up to expectations in the trailing three quarters. The results of the company surpassed our expectation in just one of the last four quarters.
The earnings surprise in the last four quarters ranged from (10.71%) to 5.00%. The average surprise over the last four quarters remained a negative 4.82%.
We have recently lowered our long-term recommendation on the company to Underperform from Neutral. The downgrade was mainly due to the company’s sensitivities to volatile weather patterns, unstable commodity prices, strict federal regulations related to underground mining operations and waste management, and unsold tons of coal at TECO Coal.
TECO Energy currently retains a short-term Zacks #5 Rank (Strong Sell rating). The company’s primary competitors include NRG Energy Inc. (NRG) and Wisconsin Energy Corp. (WEC).
Based in Tampa, Florida, TECO Energy is involved in the generation, purchase, transmission, distribution, and sale of electricity in Florida. With a market capitalization of $3.81 billion, the company has 4,290 full time employees.
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