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Why Is CenterPoint (CNP) Down 2% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for CenterPoint Energy (CNP). Shares have lost about 2% 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 drivers.

CenterPoint Energy Q2 Earnings Beat, Revenues Fall Y/Y

CenterPoint Energy, Inc. reported second-quarter 2020 adjusted earnings of 21 cents per share, which surpassed the Zacks Consensus Estimate of 19 cents by 10.5%. The bottom line however deteriorated 40% from the year-ago quarter earnings of 35 cents.

The company reported GAAP earnings of 11 cents per share compared with earnings of 33 cents registered in the prior-year quarter.

The year-over-year downside can be primarily attributed to COVID-19 pandemic-led impacts.

Revenues

CenterPoint Energy’s total revenues in the quarter were $1,575 million, which lagged the Zacks Consensus Estimate of $2,114 million by 25.5%. Moreover, the reported figure came in 5% lower than the prior-year quarter’s $1,658 million.

Decreased contribution from utility segment dragged down the top line.

Operational Results

Total expenses during the second quarter declined 6.2% to $1,340 million.

The company’s operating income rose 2.6% year over year to $235 million in the second quarter.

Interest expense and other finance charges decreased to $128 million from $134 million in the year-ago quarter.

Segment Results

The Houston Electric-Transmission & Distribution segment reported adjusted earnings of $89 million for the second quarter compared with $100 million in the year-ago quarter.

The Natural Gas Distribution segment registered adjusted earnings of $35 million compared with the year-ago quarter’s $23 million.

The Indiana Electric - Integrated segment generated earnings of $19 million compared with $16 million in the year-earlier period.

The Midstream Investments segment recorded earnings of $24 million compared with $50 million in the prior-year quarter.

The Corporate and Other Operations segment reported net loss of $28 million compared with loss of $38 million in the year-ago quarter.

Financial Condition

As of Jun 30, 2020, CenterPoint Energy had cash and cash equivalents of $168 million, down from $241 million as of Dec 31, 2019.

Total long-term debt was $10,937 million as of Jun 30, 2020, compared with $14,244 million as of Dec 31, 2019.

At the end of second-quarter 2020, the company’s net cash from operating activities was $1,181 million, up from the previous year’s $574 million.

Further, CenterPoint Energy’s total capital expenditure was $632 million in the second quarter, down from $634 million in the year-ago quarter.

2020 Guidance

CenterPoint Energy reiterated its 2020 earnings guidance. The company still expects to generate earnings of $1.10-$1.20 per share.

The Zacks Consensus Estimate for current-year earnings is pegged at $1.28, which lies above the guided range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.42% due to these changes.

VGM Scores

At this time, CenterPoint has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 indicates a downward shift. 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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