DTE Energy Tops Numbers

DTE Energy Company ( DTE - Analyst Report ) reported fourth quarter and fiscal year 2011 earnings. In the fourth quarter, the company posted operating earnings of 89 cents per share surpassing the Zacks Consensus estimate of 81 cents.

The company also beat the prior-year quarterly earnings by a penny. The results were driven by higher earnings from the Electric and Gas Utility segments in Michigan and the Energy Trading business, partially offset by lower earnings from Power & Industrial Projects.

In fiscal year 2011, operating earnings were $3.73 per share, well ahead of the Zacks Consensus Estimate of $3.51 and the year-ago figure of $3.60. Including Fermi 1 asset retirement obligation gain at Electric Utility of 5 cents per share and income tax adjustment related to Michigan Corporate Income Tax of 50 cents, GAAP EPS was $4.18 versus $3.74 in the year-ago period.

Operating Statistics

Total revenue of DTE Energy in the fourth quarter of 2011 was $2.2 billion; in line with the year-ago figure. It surpassed our expectation by $314 million. In the fiscal year, the top-line figure was $8.9 billion versus $8.6 billion in fiscal 2010. It exceeded the Zack Consensus Estimate of $7.9 billion.

Operating income in the quarter under review was $346 million compared with the year-ago operating income of $350 million. Overall DTE Energy reported net income of $151 million, up from $150 million in the fourth quarter of 2010.

Quarterly Segment Update

Electric Utility: Segment earnings during the reported quarter were $89 million or 52 cents per share, down from $95 million or 56 cents in the prior-year quarter.

Gas Utility: The segment generated operating income of $41 million or 24 cents compared with $35 million or 20 cents in the year-ago quarter.

Gas Storage and Pipelines: Segment profit was flat year over year at $15 million or 9 cents per share.

Unconventional Gas Production: Segment loss was $1 million or 1 cent per share versus a loss of $2 million or approximately 1 cent per share in the year-ago quarter.

Power and Industrial Projects: The segment posted a profit of $11 million or 7 cents per share, down from $19 million or 11 cents in the year-ago period.

Energy Trading: The segment posted a profit of $16 million or 9 cents per share, compared with $6 million or 4 cents per share in the prior-year quarter

Corporate and Other: Loss in the quarter was $20 million or 11 cents per share, compared with a loss of $19 million or approximately 11 cents per share in the prior-year quarter.

Guidance

Looking ahead, the company expects earnings to be in the range of $3.65–$3.95 per share. Apart from investing in renewable energy, environmental controls and system reliability, the company also continues to tightly control its cost structure.

At the Peer

One of the company’s peers, Wisconsin Energy Corporation ( WEC - Analyst Report ) posted net operating earnings of 49 cents per share in the fourth quarter of 2011, ahead of the Zacks Consensus Estimate of 47 cents.

However, the results fell short of the year-ago quarter’s operating earnings by 4 cents. Wisconsin Energy’s fiscal year 2011 operating earnings were $2.18 per share compared with $1.92 per share reported in 2010. The results exceeded the Zacks Consensus Estimate by 3 cents.

Outlook

Over the next five years, the company plans to invest $750 million in new businesses with Michigan-based suppliers. As Michigan companies deliver quality products at a competitive price, we believe that this will be favorable for the company.

Going forward, we also believe that the growth momentum for the company will be maintained by beneficial regulatory policies in Michigan, higher rates for its regulated business, a strong balance sheet and an industry-high dividend yield.

However, we are concerned about the present unfavorable macro backdrop, lower demand for electricity, the dismal Michigan economy and pending regulatory cases. DTE Energy currently retains a Zacks #2 Rank (Buy rating). We provide a long-term Neutral rating on the stock.

Detroit, Michigan-based DTE Energy Company is a holding company with subsidiaries engaged in regulated and unregulated energy businesses. Detroit Edison Company and Michigan Consolidated Gas Company are its largest regulated subsidiaries. DTE Energy’s unregulated businesses include gas pipelines and storage, unconventional gas exploration, development and production; power and industrial projects, coal transportation and marketing, and energy marketing and trading operations.