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Why Is CenterPoint (CNP) Down 1.5% Since Last Earnings Report?

Zacks Equity Research
General Electric (GE) closed at $10.27 in the latest trading session, marking a -0.96% move from the prior day.

A month has gone by since the last earnings report for CenterPoint Energy (CNP). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CenterPoint due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

CenterPoint Energy Q1 Earnings Miss, Revenues Up Y/Y

CenterPoint Energy reported first-quarter 2019 adjusted earnings of 46 cents per share, lagging the Zacks Consensus Estimate of 50 cents by 8%. The bottom line also declined 16.4% from the year-ago quarter’s 55 cents.

The company’s GAAP earnings came in at 28 cents per share compared with 38 cents registered in the prior-year quarter.

Revenues

CenterPoint Energy’s total revenues in the quarter were $3.53 billion, which lagged the Zacks Consensus Estimate of $3.85 billion by 8.3%. However, the reported figure was 11.9% higher than $3.15 billion a year ago.

Increased contribution from both utility and non-utility segments led to the year-over-year top-line growth.

Operational Results

Total expenses during the first quarter increased 13.2% to $3,286 million.

The company’s operating income declined 2.4% to $245 million from $251 million in the year-ago quarter.

Interest and other finance charges increased to $121 million from $78 million a year ago.

Segment Results

The Electric Transmission & Distribution segment reported operating income of $84 million in the first quarter compared with $115 million in the year-ago quarter.

The Indiana Electric segment operating loss was $9 million in the period of Feb 1, 2019 to Mar 31, 2019.

The Natural Gas Distribution segment reported operating income of $167 million compared with $156 million in the year-ago quarter.

The Energy Services segment reported operating income of $33 million against operating loss of $26 million in the year-ago quarter.

The midstream investments segment reported $62 million of equity income compared with $69 million a year ago.

The Corporate and other Operations segment incurred operating loss of $14 million against operating income of $6 million in the prior-year quarter. The decline can be primarily attributed to high merger-related expenses.

Financial Condition

As of Mar 31, 2019, CenterPoint Energy had cash and cash equivalents of $255 million, down significantly from $4,231 million as on Dec 31, 2018.

Total long-term debt was $13,759 million as on Mar 31, 2019, compared with $8,682 million as on Dec 31, 2018.

At the end of first-quarter 2019, the company’s net cash from operating activities was $271 million, down from $484 million in the previous year’s quarter.

Further, CenterPoint Energy’s capital expenditure totaled $528 million in the first quarter, up from $323 million a year ago.

2019 Guidance

The company reaffirmed its 2019 earnings guidance. The company expects to generate earnings of $1.60-$1.70 per diluted share, excluding certain impacts associated with its merger with Vectren.

The Zacks Consensus Estimate for 2019 earnings is pegged at $1.64, which lies below the mid-point of the company’s guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 7.29% due to these changes.

VGM Scores

Currently, CenterPoint has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, CenterPoint has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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