Entergy Trims Third Quarter Outlook

Entergy Corporation (ETR - Analyst Report) earlier today announced that it expects GAAP earnings and operational earnings to be approximately $2.31 per share and $2.39 per share, respectively, in the third quarter of 2009. This is low compared to the year-ago GAAP numbers of $2.41 per share and operational results of $2.50 per share.
 
The anticipated decrease in the quarter’s operational earnings is due primarily to lower results at the Utility, Parent and Other segment, partially offset by increased earnings at Non-nuclear Wholesale Assets segment. Utility, Parent & Other is expected to clock lower year-over-year operational earnings in third quarter 2009, primarily due to the absence of the 2008 adjustment reducing income tax expense and higher operation and maintenance expense. Entergy's Non-nuclear Wholesale Assets quarterly operational results are expected to improve due to the absence of the 2008 adjustment increasing income tax expense on account of the redemption of an investment. 

Entergy however re-affirmed its earnings guidance ranges, with 2009 GAAP earnings guidance to be in the range of $6.00 to $6.60 per share and 2009 operational earnings guidance to be in the range of $6.20 to $6.80 per share. 

New Orleans-based Entergy is primarily engaged in electric power production and retail distribution. With 30,000MW of generating capacity, it distributes electricity to 2.6 million customers in Arkansas , Louisiana , Mississippi and Texas . Of this, 14,631MW are gas/oil based, 2,259MW coal based, 70MW hydro based and the rest nuclear based. With around 13,000MW of nuclear-based energy, the company is the second largest nuclear power generator in the U.S. The company also distributes natural gas to 240,000 customers in Louisiana .
 
Entergy is focusing on its traditional electric utility business with a planned separation of its nuclear business. The company has shown strong resilience during two back-to-back destructive hurricanes in 2008. Going forward, stable earnings from regulated utilities and significant free cash flow available for share repurchases, dividend hikes and/or debt retirement collectively support management’s focus on creating shareholder value. However, higher outages, an expected slide in power prices and pending regulatory approvals in New York and Vermont for the proposed spin-off of its nuclear business are areas of concern. We maintain our Neutral recommendation on the shares.