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ALLETE's 4Q Rev Beats, EPS in Line

ALE TE DTE

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ALLETE Inc. (ALE - Snapshot Report) reported fourth quarter earnings of 75 cents per share compared with 53 cents per share in the year-ago quarter. ALLETE’s earnings were in line with the Zacks Consensus Estimate.

In 2012, the company reported earnings per share of $2.58, up 8.0% from the year-ago earnings of $2.39 per share. 2012 earnings edged out the Zacks Consensus Estimate of $2.57 per share.

Revenue

ALLETE’s fourth quarter revenue increased 7.0% to $256.0 million from $239.2 million in the year-ago quarter. Quarterly revenue surpassed the Zacks Consensus Estimate of $249.0 million. Favorable retail and municipal sales and benefits from renewable tax credits were responsible for the upswing in the top line.

In 2012, revenue registered a 3.5% increase to $961.2 million from $928.2 million in 2011. Revenue in 2012 was in line with the Zacks Consensus Estimate.

Operational Highlights

Sales from the regulated utility operations in the fourth quarter stood at $232.4 million compared with $219.6 million in the prior-year quarter. This was driven by increase in residential and municipal sale volumes supported by volume growth in the non-regulated energy business.

Total operating expenses were $208.1 million in the fourth quarter 2012 compared with $205.0 million in the year-ago quarter. An increase in depreciation as well as cost of fuel and purchased power led to the cost escalation.

Operating income in the fourth quarter climbed 40.0% to $47.9 million from $34.2 million in 2011. Profit rose on account of the substantial increase in the top line relative to cost.

Interest expense in the fourth quarter 2012 was $12.1 million versus $11.0 million in the year-ago quarter.

Financial Update

Cash and short-term investments at year-end 2012 were $80.8 million versus $101.1 million in 2011.

Long-term debt at year-end 2012 was $933.6 million compared with $857.9 million in 2011.

Other Utility Company Releases

Alliant Energy Corporation (LNT) reported fourth quarter 2012 operating earnings of 64 cents per share, up 10.3% from the Zacks Consensus Estimate of 58 cents. TECO Energy Inc.’s (TE - Analyst Report) fourth quarter 2012 operating earnings of 21 cents per share trailed the Zacks Consensus Estimate of 22 cents.

Our View

ALLETE has posted healthy financial results overall in 2012 with both the top and bottom lines performing better than expected. We anticipate the company’s Magnetation program, partnership venture with Steel Dynamics of Indiana and the Bison 2 and 3 renewable projects will certainly accentuate growth in the near term.

Also, the company’s increasing transition from coal- to gas-fired units, like the Lasker Energy facility, would fetch higher profits, going forward. ALLETE at present carries a Zacks Rank #2 (Buy).

Another Zacks Rank #2 (Buy) utility operator DTE Energy Inc.’s (DTE - Analyst Report) financial results are yet to be released.

Based in Duluth, MN, ALLETE together with its subsidiaries primarily engages in the generation, transmission, and distribution of coal-fired, hydro, wind, and biomass co-fired power in the United States.

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