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Xcel Energy Inc. (XEL - Analyst Report) recorded operating earnings in the second quarter 2013 of 44 cents per share, up 3 cents from the year-ago quarter. Earnings also beat the Zacks Consensus Estimate by 15.8%.

Favorable rate increases in the Colorado, Wisconsin, South Dakota and Texas operations, interim rate changes in Minnesota and North Dakota businesses as well as increased natural gas sales due to a cooler weather allowed the company to post upbeat earnings.

GAAP earnings were 40 cents per share compared with 38 cents per share in the year-ago period. The disparity between GAAP and pro forma earnings can be attributed to a net loss of 4 cents from miscellaneous costs.

Total Revenue

Xcel Energy's revenue increased 13.4% year over year to $2.6 billion in the reported quarter. The sharp year-over-year upswing was due to encouraging electric and natural gas sales thanks to lingering cold weather.

Quarterly revenue also outstripped the Zacks Consensus Estimate by 6.7%.

Segment Revenue

Electric: Revenue from this segment surged 9% year over year to $2.2 billion. This was mainly due to a rise in residential electric sales.

Natural Gas: Revenue from the Natural Gas business also registered a substantial increase of 54.3% to $341.0 million on account of rising U.S. gas prices.

Other: Segment revenue in the reported quarter was $17.7 million versus $16.5 million in the year-ago period.

Quarterly Highlights

Total operating expenses of Xcel Energy climbed 16.5% year over year to $2.17 billion. The escalating costs can be attributed to a 110.3% rise in cost of natural gas sold and transported compounded by an 18.3% rise in electric fuel and purchased costs.

Operating income declined marginally to $402.2 million from $405.7 million on account of costs outweighing the revenue expansion.

Total interest charges after Allowance for funds used during construction ("AFUDC") plunged 5.4% at the end of the second quarter 2013 to $136.5 million.

Financial Update

Long-term debts as of Jun 30, 2013, were $10.8 billion. As of Jul 25, 2013, Xcel Energy had available liquidity of nearly $2.0 billion.

In May 2013, Xcel Energy issued $450 million, 0.75% senior unsecured notes due May 9, 2016. In addition, the company issued $400 million, 2.6% first mortgage bonds due May 15, 2023. As of Jun 30, 2013, Xcel Energy sold 7.7 million shares for net proceeds of $223 million.


Xcel Energy retained its prior earnings outlook in the range of $1.85 to $1.95 per share for 2013. Also, the company maintained its estimated increase in operating and maintenance expense outlook of 4% to 5%. Projected increase in depreciation expense will also remain in the range of $75 million to $85 million over 2012 levels.

Interest expense is forecast to decline in the range $40.0 million to $45.0 million approximately from 2012.

Other Utility Company Releases

NextEra Energy Inc. (NEE - Analyst Report) posted adjusted earnings of $1.46 per share in the second quarter, higher than the Zacks Consensus Estimate of $1.29 per share.

NiSource Inc. (NI - Analyst Report) reported second quarter 2013 earnings of 23 cents per share, missing the Zacks Consensus Estimate by 4.2%.

CMS Energy Inc. (CMS - Analyst Report) posted second quarter pro forma earnings of 29 cents lagging the Zacks Consensus Estimate of 35 cents.

Our View

Xcel Energy yet again beat earnings estimates in the second quarter 2013. The recovery in natural gas price in the U.S. is expected to spur the company’s top line in the upcoming quarters.

In addition, Xcel Energy’s aggressive initiatives in expanding its renewable portfolio will bode well for its broad growth objectives The Obama Climate plan, which calls for increasing reliance on renewables and natural gas based energy source, will also provide an incentive to the company’s green goals. Xcel Energy currently retains a Zacks Rank #3 (Hold).

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