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CenterPoint Energy Inc. (CNP - Analyst Report), a domestic energy delivery company, reported second quarter 2013 results with adjusted earnings of 30 cents per share beating the Zacks Consensus Estimate of 27 cents. Also, earnings were above the year-ago figure of 29 cents.

The results reflect the company’s strong portfolio and solid results at its gas distribution utilities that were able to offset the impact of mild weather.

Including a deferred tax charge of 52 cents per share related to the formation of the midstream partnership and midstream partnership formation costs of 1 cent per share, GAAP loss per share reported by the company was 23 cents.

Operational Results

CenterPoint Energy’s total revenue for the reported quarter increased 24.2% year over year to $1,894 million. The figure also easily surpassed the Zacks Consensus Estimate of $1,544 million.

Natural gas expenses were up 115% year over year to $880 million. Operation and maintenance expense declined 1.1% year over year to $446 million. During the quarter, operating income was $223 million, down 26.2% year over year.

Segment Results

Electric Transmission & Distribution

During the quarter, the segment generated operating income of $165 million, down 13.6% year over year. Operating income included $131 million from the regulated electric transmission & distribution utility operations (“TDU”) and $34 million related to securitization bonds. Operating income at TDU was down 14.3% year over year due to a milder weather.

Natural Gas Distribution

Segment operating income was $25 million, up from $9 million in the year-ago quarter. The upside reflects colder weather as compared to last year, rate changes, and increased economic activity and continued control of operation and maintenance expenses. However, this was partially offset by an increase in depreciation and property taxes.

Competitive Natural Gas Sales and Services

Segment operating income was $3 million versus an operating loss of $4 million in the year-ago quarter.

Interstate Pipelines/ Field Services

For the month of April, just before the formation of Enable Midstream Partners on May 1, 2013, the Interstate Pipelines segment reported an operating income of $20 million and equity earnings of $2 million from its 50% interest in the Southeast Supply Header (SESH) and the Field Services segment reported an operating income of $20 million.

On May 1, 2013, CenterPoint Energy, OGE Energy Corp. (OGE - Analyst Report) and ArcLight Capital Partners, LLC had declared the closing of a previously announced partnership that includes CenterPoint Energy's interstate pipelines and field services businesses and the midstream business of Enogex LLC. The partnership will be managed by a general partner whose governance will be shared by CenterPoint Energy and OGE on an equal basis.

Other Operations

Operating loss at the segment amounted to $10 million versus an operating income of profit of $3 million in the year-ago quarter. The decline reflects expenses associated with the formation of Enable Midstream Partners as well as higher property taxes.

Financial Condition

As of Jun 30, 2013, CenterPoint Energy reported cash and cash equivalents of $497 million, down from $646 million as of Dec 31, 2012. Total long-term debt was $7,919 million, down from $8,357 million at the end of Dec 31, 2012.

Guidance

The company expects earnings in the range of $1.17 to $1.25 for full-year 2013.

At the Peer

Recently, diversified utility, NiSource Inc. (NI - Analyst Report) posted net operating earnings of 23 cents per share in the second quarter of 2013, a penny or 4.2% lower than the Zacks Consensus Estimate. Earnings were however 4.5% higher than the year-ago quarter.

Our Take

CenterPoint Energy’s top and bottom line succeeded in beating the Zacks Consensus Estimate. Going forward, the company’s stable and regulated electric power operations and gas distribution utilities will help it to generate a relatively stable and growing earnings stream. However, pending regulatory cases, the tepid economy, lower demand for electricity, volatility in wholesale natural gas prices and a significant presence in a hurricane prone section of the U.S keep us concerned. CenterPoint Energy presently retains a short-term Zacks #4 Rank (Sell).

In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peer Pinnacle West Capital Corporation (PNW - Analyst Report).

 

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