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Why Is Xcel (XEL) Up 8.8% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Xcel Energy (XEL). Shares have added about 8.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Xcel due for a pullback? 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 catalysts.

Xcel Energy Q1 Earnings and Revenues Lag Estimates

Xcel Energy posted first-quarter 2020 operating earnings of 56 cents per share, lagging the Zacks Consensus Estimate of 59 cents by 5.1%. The bottom line also declined 8.2% from the year-ago earnings of 61 cents per share.

The decline in earnings was mainly due to lower year-over-year demand on account of unfavourable weather conditions.

Total Revenues

Xcel Energy’s first-quarter revenues of $2,811 million missed the Zacks Consensus Estimate of $3,276 million by 14.2%. Revenues also fell 10.5% from the prior-year quarter’s $3,141 million. The decline was due to lower contribution from both electric and natural gas segments than the prior-year quarter.

Segment Results

Electric: Revenues declined 5.2% to $2,203 million from $2,325 million in the last reported quarter.

Natural Gas: Revenues fell 26.6% from the year-ago quarter to $583 million.

Other: Revenues in the segment amounted to $25 million, up 13.6% from the year-ago figure.

Quarterly Highlights

Total operating expenses fell 11.3% year over year to $2,356 million, primarily due to lower electric fuel and purchased power expenses.

Operating income in the reported quarter decreased 6.4% from the prior-year quarter to $455 million.

Total interest charges and financing costs in the reported quarter rose 5.6% from the prior-year figure to $189 million.

Looking Ahead

Xcel Energy reaffirmed its 2020 earnings per share guidance in the range of $2.73-$2.83 and long-term earnings growth in the band of 5-7% from a 2019 base of $2.60 (mid-point of the original 2019 guidance range). The mid-point of the current earnings guided range is $2.78, which is in line with the Zacks Consensus Estimate.

It is implementing contingency actions to offset the negative impacts of the COVID-19 pandemic, whose magnitude is quite uncertain.

Xcel Energy projects an annual increase in dividend rate in the range of 5-7% and targets a payout ratio of 60-70%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Xcel 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

Xcel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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