TECO Energy Q2 Earnings Beat on Lower Expense, Revenues Miss

Zacks

TECO Energy, Inc. (TE) announced second-quarter 2014 operating earnings of 28 cents per share, a penny above the Zacks Consensus Estimate. Earnings were 12% higher than the year-ago figure.

Earnings were driven by the improvement in economic conditions in its service territories, which resulted in customer and demand growth. A rate case settlement in Tampa Electric also helped the cause. In addition, lower expenses also contributed to the upside.
 

 

Including $2.7 million of costs associated with the pending acquisition of New Mexico Gas Co., the company reported net income of 27 cents per share, up 12.5% year over year.

Total Revenue

Total revenues at TECO Energy in the secondquarter were $726.3 million, short of the Zacks Consensus Estimate of $758 million.

Total revenues in the reported quarter was 1.3% lower than year-ago revenue. The downside was attributable to lower revenues from both regulated and unregulated operations.

Operational Highlights

Total expenses in the second quarter decreased 3.8% year over year to $593.1 million. The decline resulted from lower fuel and purchased power expenses, lower cost of natural gas sold and reduction in mining-related costs.

Interest expenses in the quarter were $42.2 million, marginally lower than $42.7 million in the year-ago quarter.

In the reported quarter, the company witnessed a 1.7% and 1.8% increase in electric and gas customers, respectively.

Segment Details

Tampa Electric: Segment net income was $62.2 million, up 22.9% from $50.6 million in the year-ago quarter. The upside can be attributed to a base rate settlement, expanded customer base as well as higher energy sales attributable to favorable weather and lower operations and maintenance expenses. However, higher depreciation expenses were partial dampeners.

Peoples Gas: Segment net income was down 5.1% year over year to $7.5 million. The decline stemmed from lower therm sales due to a mild spring weather, two power generators remaining idle, higher general non-fuel operations and maintenance expense, as well as increase in depreciation and amortization expenses.

TECO Coal: Segment income was $0.8 million, up 14.3% year over year. Lower cost of production offset the lower selling prices and aided the improvement.

Parent & Other: In the second quarter, the cost from continuing operations was $12.1 million versus a cost of $7.6 million in the corresponding quarter of 2013.

Financial Update

Cash and cash equivalents of TECO Energy as of Jun 30, 2014, were $167 million, down from $185.2 million as of Dec 31, 2013.

Capital expenditure in the reported quarter was $184 million, higher than $146.6 million spent in the second quarter of 2013.

Cash flow from operating activities in the second quarter was $74.1 million, down from $129.9 million during the prior-year period.

Guidance

TECO Energy reiterated its consolidated earnings per share guidance for 2014 in the band of 95 cents to $1.05.

Peoples Gas maintained its expectation to earn above the midpoint of its allowed Return on Equity (:ROE) range of 9.75% to 11.75%. The segment expects to benefit from customer switching from other sources of fuel to natural gas.

Tampa Electric expects to earn in the mid range of its authorized allowed ROE of 9.25% to 11.25%.This primarily is expected to be driven by the September rate case settlement and base revenues of $50.0 million in 2014.

TECO Coal has 90% of its expected sales contracted and priced for 2014. The company expects 2014 sales of about 6 million tons.

Zacks Rank

TECO Energy currently carries a Zacks Rank #3 (Hold).

Other Company Releases

CMS Energy Corporation (CMS) posted second-quarter earnings per share of 30 cents, beating the Zacks Consensus Estimate of 26 cents by 15.4%.

Entergy Corp. (ETR) reported second-quarter earnings of $1.11 per share, missing the Zacks Consensus Estimate by 2.6%

DTE Energy Company (DTE) reported second-quarter operating earnings per share of 73 cents, missing the Zacks Consensus Estimate of 77 cents by 5.2%.
 

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