DTE Energy Company ( DTE - Analyst Report ) reported third quarter 2012 earnings per share of $1.31, easily beating the Zacks Consensus Estimate by 19 cents. Results improved 22.4% year over year.

The upside came on the back of warm weather at Detroit Edison, MichCon’s improved performance and growth in reduced emissions fuel at Power & Industrial projects. However, lower earnings at Energy Trading limited the upside to some extent.

Operating Statistics

Total revenue of DTE Energy in the third quarter of 2012 was $2.21 billion, declining 2.6% year over year. The reported quarter’s revenue also missed the Zacks Consensus Estimate of $2.36 million.

Fuel, purchased power and gas expenses declined 12% year over year to $761 million. However, operation and maintenance expenses were up 3.3% year over year to $692 million.

The decline in revenue was more than offset by decline in total expenses, resulting in a meager increase in operating income. Operating income was $410 million, versus $399 million in the year-ago quarter.

Segment Update

Electric Utility: Segment earnings during the reported quarter were $194 million or $1.13 per share, up from $57 million or 92 cents in the prior-year quarter.

Gas Utility: Segment profit in the third quarter was $4 million or 2 cents per share, reversing the loss of $11 million or 6 cents per share a year ago.

Non-Utility Operations

Gas Storage and Pipelines: The segment generated profit of $14 million or 8 cents per share versus $13 million or 8 cents per share in the year-ago period.

Power and Industrial Projects: The segment posted a profit of $22 million or 13 cents per share, up from $12 million or 7 cents per share in the year-ago period.

Energy Trading: The segment posted a profit of $1 million or 1 cent per share versus $22 million or 13 cent per share in the third quarter of 2011.

Corporate and Other: Loss in the quarter was $8 million or 6 cents per share, flat with year-ago level.

Financial Update

As of September 30, 2012, cash and cash equivalents were $59 million, down from $68 million at the end of December 31, 2011. At the end of the quarter, long-term debt, net of current portion, was $7.12 billion versus $7.19 billion at the end of December 31, 2011.

Revised Guidance

The company raised its earnings guidance for 2012 to the range of $3.80 to $4.00 per from $3.65 to $3.95 per share.

Our Take

DTE Energy easily surpassed our bottom line expectations. The company is on track to meet its goals based on its investments in renewable energy, environmental controls and utility infrastructure improvements.

Going forward, stable and growing utilities and its complementary non-utility businesses, higher authorized rates for its regulated business, and growth opportunities in its un-regulated businesses will continue to be the growth drivers for the company. However, we remain concerned about the present unfavorable macro backdrop, lower demand for electricity, the dismal economy in Michigan state and pending regulatory cases of the company.

We have a Neutral recommendation on DTE Energy. It currently holds a Zacks #2 Rank translating into a short-term Buy rating.

CenterPoint Energy, Inc. ( CNP - Analyst Report ) , which closely competes with DTE Energy holds Zacks #3 Rank, translating into a short-term Hold rating. The company is scheduled to release its earnings results before the opening bell on November 7.