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ALLETE Misses on Earnings Ests

Zacks Equity Research

Energy company ALLETE, Inc.’s (ALE) first quarter 2014 earnings of 83 cents per share were 2 cents lower than the Zacks Consensus Estimate.  However, earnings were in line with the year-ago figure.

Earnings per share during the reported quarter were negatively impacted by 6 cents due to a higher number of shares outstanding.

The company released its earnings before the market opened on May 7, 2014. Since then the company has gained a marginal 1.2% closing at $50.67 per share yesterday. Systematic capital investment and start-up of new projects make future earnings more visible. This seems to have boosted investor confidence.

Total Revenue

Total revenues in the first quarter of 2014 were $297 million, up 12.5% from the prior-year quarter and ahead of the. Zacks Consensus Estimate by 3.5%.

The extreme weather in its service territories boosted demand for electricity. Electricity sales increased 3% year over year.

Highlights of the Release

ALLETE reported an increase in total kilowatt-hours sold in the reported quarter. The year-over-year increase was due to lower demand from residential and commercial customers.

Total operating expenses in the reported quarter were $248.2 million, up 13.1% year over year, primarily due to higher fuel and purchased power and operation and maintenance expenses.

Interest expenses in the reported quarter increased 4.1% year over year to $12.8 million.

Financial Update

ALLETE’s cash & cash equivalents as of Mar 31, 2014, were $44.6 million, down from $97.3 million as of Dec 31, 2013.

Long-term debt as of Mar 31, 2014, was $1.20 billion, higher than $1.08 billion as of Dec 31, 2013.

Guidance

ALLETEreiterated its 2014 earnings in the range of $2.75 to $2.95 per share. The company expects to invest nearly $640 million in 2014, much higher than $339.5 million invested in 2013.

Other Releases

Entergy Corporation’s (ETR) earnings came in at $2.29 per share in the first quarter, beating the Zacks Consensus Estimate by 8.5%.

DTE Energy Company (DTE) reported first quarter 2014 operating earnings per share of $1.69, beating the Zacks Consensus Estimate of $1.41 by 19.8%.

American Electric Power Company Inc. (AEP) reported first quarter 2014 operating earnings of $1.15 per share, beating the Zacks Consensus Estimate of 91 cents by 26.4%.

OUR VIEW

ALLETE’s regulated operations are doing well and the issue of new equities is generating adequate funds to carry out development activities.

A few projects are scheduled to come on-line this year and some are scheduled to start over the course of the next few years. The necessary funding for and completion of these projects hold the key to future success.

ALLETE currently has a Zacks Rank #4 (Sell).

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