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Why Is CenterPoint (CNP) Down 13.7% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for CenterPoint Energy (CNP). Shares have lost about 13.7% 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 the most recent earnings report in order to get a better handle on the important drivers.

CenterPoint Energy Q3 Earnings Beat, Revenues Up Y/Y

CenterPoint Energy, Inc. reported third-quarter 2019 adjusted earnings of 53 cents per share, which surpassed the Zacks Consensus Estimate of 43 cents by 23.3%. The bottom line also improved 36% from the year-ago quarter’s figure.

The company’s GAAP earnings came in at 47 cents per share compared with35 cents in the prior-year quarter.

The year-over-year upside can be attributed to higher revenues as well as operating income generated in the third quarter.

Revenues

CenterPoint Energy’s total revenues in the quarter were $2.74 billion, which missed the Zacks Consensus Estimate by 5.4%. However, the top line surged 24% from $2.21 billion of revenues generated in the year-ago quarter. Notably, increased contribution from both the utility and non-utility businesses led to the top-line growth.

Operational Results

Total expenses during the third quarter increased 18.3% to $2,350 million.
The company’s operating income also increased 73% year over year to $392 million.

Interest and other finance charges increased to $134 million from $90 million a year ago.

Segment Results

The Houston electric-transmission & distribution segment reported operating income of $269 million in the third quarter compared with $227 million in the year-ago quarter.

The Natural Gas distribution segment reported operating income of $27 million compared with $3 million in the prior-year quarter.

The Energy Services segment registered operating income of $2 million compared with $9 million in the year-ago quarter.

The Infrastructure Services segment reported $42 million of operating income in the reported quarter.

The Corporate and Other segment generated operating income of $4 million compared with $5 million in the prior-year quarter.

The Indiana electric–integrated segment reported operating income of $48 million inthe third quarter of 2019.

Financial Condition

As of Sep 30, 2019, CenterPoint Energy had cash and cash equivalents of $259 million, down significantly from $4,231 million as of Dec 31, 2018.

Total long-term debt was $14,014 million as of Sep 30, 2019 compared with $8,682 million as of Dec 31, 2018.

At the end of the third quarter, the company’s net cash from operating activities was $1,086 million, down from $1,679 million in the year ago quarter.

Further, CenterPoint Energy’s total capital expenditure totaled $666 million in the third quarter, up from $434 million in the year ago quarter.

2019 Guidance

CenterPoint Energy updated its 2019 earnings guidance. The company currently expects to generate earnings per share near the upper end of its earlier provided guidance of $1.60-$1.70.

The Zacks Consensus Estimate for 2019 earnings is pegged at $1.64, which lies below the company’s guidance.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -5.68% due to these changes.

VGM Scores

At this time, CenterPoint has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

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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