Q4 at Xcel Energy Keeps Earnings Streak Alive

Zacks Equity Research

Xcel Energy Inc. (XEL) has successfully managed to keep its earnings streak alive with its fourth-quarter and full year 2013 earnings results. This electricity and natural gas company reported earnings of 30 cents per share in the fourth quarter of 2013, surpassing the Zacks Consensus Estimate as well as the year-ago earnings figure by a penny.

For full year 2013, Xcel Energy posted operating net earnings of $1.95 per share, beating the Zacks Consensus Estimate by a couple of cents. Earnings not only exceeded the year-ago results by 7%, but it also achieved the high end of the company’s guidance of $1.85 to $1.95 per share for 2013. Net income, including charge for a potential SPS customer refund based on FERC orders issued, was $1.91 per share, up 3.2% year¬ over year.

The upside came on the back of higher electric and gas margins due to rate increases in various states, the impact of favorable colder weather on natural gas business and reduced interest charges. Nonetheless, planned increases in operating and maintenance expenses and depreciation limited the upside.

Total Revenue

Xcel Energy's revenues increased 7.1% year over year to $2.73 billion in the reported quarter. Quarterly revenues surpassed the Zacks Consensus Estimate of $2.694 billion by 1.5%.

Full year 2013 revenues grossed $10.9 billion increasing nearly 8% year over year, and managed to top the Zacks Consensus Estimate of $10.78 billion.

Segment Revenue

Electric: Revenues from this segment surged 5.5% year over year to $2.12 billion. Fluctuating input costs hardly had any impact on the performance of this segment as the fuel recovery mechanism helped the company to recover current expenses.

Natural Gas: Revenues from the Natural Gas business also registered an increase of 13% to $588 million.

Other: This segment reported revenues of $20.4 million, 4.1% higher than $17.1 million registered in the year-ago period.

Quarterly Highlights

Total operating expenses climbed 8.1% year over year to $2.41 billion. The escalating costs can be attributed to an increase in electric fuel and purchased power, cost of natural gas sold and transported, cost of sales, and operating and maintenance expenses.

The magnitude of revenue increase outpaced the magnitude of increase in operating expenses, driving operating income improvement by 2.9%.

Total interest charges and financing costs were 0.1% lower than the prior-year quarter, primarily due to the refinancing of debts at lower interest rates.

Financial Update

As of Jan 28, 2014, Xcel Energy had available liquidity of nearly $1.252 billion, $3.4 million of which was cash while the balance was available from its credit facilities.

In the first nine months of 2013, Xcel Energy and its subsidiaries issued different series of notes amounting to $1.45 billion to redeem outstanding notes, fund acquisitions and use the rest for general corporate purposes. As of Sep 30, 2013, Xcel Energy sold 7.7 million shares for net proceeds of $223 million.

Guidance

Xcel Energy reaffirmed 2014 operating earnings guidance in the range of $1.90 to $2.05 per share.

The company expects to increase its future wind production by 40% that will benefit customers’ fuel bill over the next two decades.

Performance of Other Players in the Industry

NextEra Energy Inc. (NEE) announced fourth-quarter 2013 operating earnings of 95 cents per share, missing the Zacks Consensus Estimate by a penny.

American Electric Power Company Inc. (AEP) reported fourth-quarter 2013 operating earnings of 60 cents per share, beating the Zacks Consensus Estimate of 56 cents by 7.1%.

CMS Energy Corp.’s (CMS) fourth quarter earnings per share of 37 cents were in line with the Zacks Consensus Estimate. Earnings improved 48% year–over–year.

Our View

Xcel Energy maintained its positive earnings surprise streak in this quarter as well. However, the current beat was lower than the last four-quarter average beat of 3.4%. Going forward, the company needs to put a check on its operating expense, which is weighing on margin expansion.

However, the positive rate changes in its service territories did help results. The initiatives taken by Xcel Energy to add renewable assets in its generation portfolio are appreciable. These initiatives in a way allow Xcel Energy to meet the renewable generation standards fixed in the different states where it operates.

Xcel Energy currently retains a Zacks Rank #3 (Hold).

Read the Full Research Report on AEP
Read the Full Research Report on CMS
Read the Full Research Report on XEL
Read the Full Research Report on NEE


Zacks Investment Research