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DTE Energy Company (DTE - Analyst Report) reported first quarter 2012 results. During the quarter, operating earnings per share were only 91 cents, significantly missing the Zacks Consensus Estimate of $1.16 per share and the year-ago figure of $1.04. The decline was due to an unusually warm winter.
Total revenue of DTE Energy in the first quarter of 2012 was $2.25 billion versus $2.43 billion in the year-ago period, reflecting a decline 7.5%. Reported quarter revenue also missed the Zacks Consensus Estimate by $142 million.
Operating income decreased by 20% as the decline in revenues and increase in operation and maintenance expenses of 15% could not offset the 17% decline in fuel, purchased power and gas expenses.
Electric Utility: Segment earnings during the reported quarter were $96 million or 56 cents per share, down from $97 million or 57 cents in the prior-year quarter.
Gas Utility: Segment profit in the quarter under review was $52 million or 31 cents per share versus $83 million or 49 cents per share a year ago.
Gas Storage and Pipelines: The segment generated profit of $17 million or 10 cents per share versus $15 million or 9 cents per share in the year-ago period.
Unconventional Gas Production: Segment loss narrowed to $1 million or 1 cent per share from 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 $8 million or 5 cents per share, down from $10 million or 6 cents per share in the year-ago period.
Energy Trading: The segment posted a loss of $2 million or 1 cent per share versus a profit of $2 million or 1 cent per share in the first quarter of 2011.
Corporate and Other: Loss in the quarter was $14 million or 9 cents per share compared with a loss of $17 million or 10 cents per share in the prior-year quarter.
As of March 31, 2012, cash and cash equivalents were $57 million, down from $197 million at the end of March 31, 2011. At the end of the quarter, long-term debt of the company was $7.1 billion versus $7 billion at the end of year-ago quarter.
Net cash from operating activities as reported by the company in the quarter under review was $620 million, down $102 million from the first quarter of 2011. Total capital expenditures made by the company were $392 million compared with $270 million in the comparable period a year ago.
At the Peer
Yesterday, a DTE Energy peer, CMS Energy Corporation (CMS - Analyst Report) announced adjusted earnings of 37 cents per share for the first quarter 2012, just missing the Zacks Consensus Estimate of 39 cents. The results were below the year-ago earnings of 51 cents per share.
Despite the earnings miss this quarter, the company continues to see economic recovery in Michigan driven by investments in renewable energy, environmental controls and utility infrastructure improvements.
The company is confident that it will be successful in identifying opportunities throughout the balance of fiscal 2012 by leveraging its portfolio of businesses and making one-time cost reductions which will help in offsetting the negative impacts of weather. As a result, the company maintained its operating earnings for fiscal 2012 in the range of $3.65 to $3.95 per diluted share.
In the long term, the company targets to provide a growth arte of 5% to 6%, an attractive dividend yield and a strong balance sheet.
DTE Energy’sregulated electric and gas utilities in Michigan generate arelatively stable and growing earnings stream. Moreover, it continues to focus on its five-year commitment to increase spending on goods and services with Michigan-based supplier as part of the Pure Michigan Business Connect initiative it made in 2011.
Apart from generating profit, this initiative also leads to a decline in the unemployment rate. Currently, the unemployment rate is 8.5%, down from 10.5% in the first quarter of 2011.
Going forward, we also expect the company to benefit from Advanced Metering Infrastructure program, Reduced Emissions Fuel facilities, and desulphurization units to improve its operational efficiency.
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 #3 Rank (short-term Hold 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 also has four non-utility segments engaged in a variety of energy-related business.