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Ameren Profits In Line, Sales Dip


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Before the bell, Ameren Corporation (AEE - Analyst Report) reported first quarter 2012 results. During the quarter, pro forma earnings per share were 22 cents, in line with the Zacks Consensus Estimate. Reported earnings fell short of the year-ago figure by 3 cents.

The decline in year-over-year results reflect lower regulated utility electric and natural gas sales and decreased margins at the Merchant Generation segment, partially offset by increased electric utility rates in Missouri, increased natural gas delivery rates in Illinois and lower non-fuel operations and maintenance expenses.

During the quarter, GAAP loss per share was $1.66 compared to earnings per share of 29 cents in the year-ago period.  The significant variation of $1.88 per share between GAAP loss and pro forma earnings was due to a non-cash asset impairment charge of $1.55 related to Ameren Energy Resources Generating Company's Duck Creek Energy Center, the reduction of tax benefit of 36 cents related to asset impairment and annual estimated effective income tax rate, and a gain on net unrealized mark-to-market activity of 3 cents.

Operational Performance

In the reported quarter, net revenues declined 12.9% to $1.66 billion. The figure also fell short of the Zacks Consensus Estimate by $134 million. Revenue from Electric sales was down 10.9% year over year to $1.3 billion, while revenue from Gas declined 19.8% year over year.

Volume sales of electricity to native load utility customers decreased from 27.8 billion Kilowatt-hour (KWh) to 24.3 billion.  

Segment Performance

Ameren Missouri: During the quarter, the segment reported pro forma earnings of $20 million compared with $21 million in the year-ago quarter. The year-over-year decline reflects lower electric sales to native load customers partially offset by increased electric rates that were effective from July 2011 onward and lower non-fuel operations and maintenance expenses. The company reported GAAP earnings of $21 million, flat year over year.

Ameren Illinois: The company generated pro forma net income of $26 million, down from $33 million in the year-ago quarter due to a decrease in electric sales and natural gas sales. These negatives were, however, partially offset by realization of revenue related to Illinois electric delivery formula ratemaking as well as increased natural gas delivery rates, effective January 2012. The company reported GAAP earnings of $27 million compared with $33 million in the year-ago quarter.

Merchant Generation: The segment generated pro forma earnings of $14 million, up from $11 million in the year-ago period.  The year-over-year increase was driven by a lower effective core income tax rate, partially offset by decreased segment margins due to lower market prices for electricity. GAAP loss was $363 million compared to earnings of $20 million in the year-ago quarter.

Financial Condition

At the end of March 31, 2012, Ameren reported cash and cash equivalents of $208 million compared with $573 million in the year-ago period. As of March 31, 2012, long-term debt, net decreased minimally to $6.7 billion versus $6.9 billion at the end of first quarter 2011.

During the reported quarter, net cash provided by operating activities was $392 million compared with $560 million in the first quarter of 2011. Capital expenditure in the quarter was $282 million, up from $231 million the comparable year-ago period.


For fiscal 2012, the company expects pro forma earnings to be in the range of $2.20 to $2.50 per share. Including impairment charges, it expects GAAP EPS to be in the range of 65 cents to 95 cents per share.

Peer Comparison

Today, its competitor, The AES Corporation (AES - Analyst Report) reported first quarter 2012 adjusted earnings per share of 37 cents, 9 cents above the Zacks Consensus Estimate Earnings also comfortably surpassed the year-ago figure of 24 cents per share.

Our Take

Ameren’s stable and regulated electric power operations in the Midwest generate a relatively stable and growing earnings stream. We expect future growth to be driven by improved plant operations, focus on cost management, rate relief and installation of emissions reduction equipment (scrubbers) at its generation plants. However, the company is negatively impacted by the impairment charges related to Ameren Energy Resources Generating Company's Duck Creek Energy Center.

Also, its predominantly coal-based generation assets and pending regulatory cases are a matter of concern. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

St. Louis-based Ameren Corporation is a holding company which engages in the generation and distribution of electricity and natural gas and serves residential, commercial, industrial and wholesale end-markets in Missouri and Illinois.

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