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Before the bell, Entergy Corporation (ETR - Analyst Report) reported its third quarter 2011 operating EPS of $3.53, beating the Zacks Consensus Estimate of $3.36. Earnings also, comfortably beat the year-ago quarterly EPS of $2.76.
Operating earnings per share in the reported quarter were higher than the year-ago period by 77 cents. Of these Utility EPS was $1.17 higher due primarily to a tax settlement that resulted in a significant decrease in income tax expense. This was partially offset by a regulatory charge to reflect the portion of the tax benefit that will be shared with Entergy Louisiana, LLC's customers.
Earnings fell at Entergy Wholesale Commodities by 3 cents primarily due to lower net revenue stemming from decreased pricing and a higher effective income tax rate.
Lastly Parent & Other segment nosedived to a loss of 15 cents per share resulting in a year-over-year difference of 23 cents. The downside came from higher income tax expense.
On a reported basis, including one-time items, earnings came in at $3.53 for the reported quarter compared to $2.62 in the year-ago quarter.
Revenue in the reported quarter rose 1.9% year-over-year to $3.4 billion, falling short of the Zacks Consensus Estimate of $3.5 billion. Of this, Electricity revenue was up 3.6%, Natural Gas was down 3.0%, while Competitive Businesses were down 4.6%. Overall Entergy reported net income of $628.1 million versus $492.9 million in the year ago period.
Utility's quarterly earnings both on reported and operational bases were $524.1 million, compared to $333.6 million in the third quarter 2010. Higher earnings stemmed from a tax settlement with the Internal Revenue Service entered into in August 2011 that resulted in a significant decrease in income tax expense.
Also contributing to the higher earnings was lower non-fuel operation and maintenance expense due primarily to a reduction in compensation and benefit expenses. These benefits were partially offset by higher depreciation and amortization expense from higher depreciable plant balances.
Residential sales in the reported quarter, on a weather-adjusted basis, increased 0.1% compared to the year-ago quarter. Commercial and governmental sales, on a weather-adjusted basis, increased 0.3% quarter over quarter. Industrial sales in the third quarter increased 7.3% compared to the same quarter of 2010.
Overall retail sales growth, on a weather-adjusted basis, was 2.6% in the reported quarter driven by strong industrial sales. In the reported quarter, Entergy Louisiana, Entergy Texas, Inc. and Entergy Mississippi, Inc. had the strongest industrial sales growth at 15.1%, 9.5%, and 3.1%, respectively.
Entergy Wholesale Commodities
Entergy Wholesale Commodities’ earnings were $130.2 million both on reported and operational bases, compared to as-reported earnings of $143.0 million and operational earnings of $168.2 million in the year-ago quarter. Entergy Wholesale Commodities' operational earnings declined partially as a result of lower net revenue driven by lower energy and capacity pricing on its nuclear fleet. The effect of lower pricing was partially offset by higher volume as a result of fewer refueling and unplanned nuclear outage days.
Parent & Other
Parent & Other clocked as-reported and operational loss of $26.3 million compared to earnings of $16.2 million in the third quarter of 2010. The downside came from higher income tax expense.
Entergy in the reported quarter generated $1.2 billion from operating activities compared to $1.7 billion in the year-ago quarter. Cash and cash equivalents at the end of the reported period were $987.1 million versus $1.3 billion at fiscal-end 2010. Long-term debt increased to $10.2 billion compared to slightly above $11.3 billion at fiscal-end 2010.
Entergy raised its fiscal 2011 earnings guidance range to $7.15–$7.65 from earlier guidance range of $6.35−$6.85 per share.
New Orleans-based Entergy Corp. is primarily engaged in electric power production and retail distribution of power. With 30,000MW of generating capacity, it distributes electricity to 2.7 million customers in Arkansas, Louisiana, Mississippi and Texas.
In the near-term, however, we retain our long-term Neutral stance on Entergy in the absence of any positive triggers, which is supported by a Zacks #3 Rank (short-term Hold recommendation) for the stock. The near-term cautious stance is also shared by its peers like American Electric Power Company Inc. (AEP - Analyst Report) and Ameren Corporation (AEE - Analyst Report).