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Covanta Holding Corporation (CVA - Snapshot Report) reported adjusted loss per share of 21 cents in the first quarter of 2013, wider than the Zacks Consensus Estimate of a loss of 13 cents and the year-ago loss of 9 cents.

The significant loss reflects lower operating income and higher interest expense as a result of the refinancings that were completed in 2012. Also, more than the usual planned plant maintenance and unplanned repairs also affected the bottom-line numbers.

Including a one-time gain of 2 cents per share, loss per share was 19 cents per share in the reported quarter versus 9 cents per share in the year-ago quarter.

Operating Highlights

Total revenue was $373 million in the quarter, missing the Zacks Consensus Estimate of $396 million. The top-line was also lower than the year-ago figure of $392 million. The decline reflects lower construction revenue due to increased maintenance activity. However, this was partially offset by the benefits from higher energy prices and from organic growth initiatives.

Operating expenses were $378 million, down from $389 million in first quarter of 2012 due to lower construction expense, a gain related to the elimination of the defined benefit pension obligation, and the benefits from organic growth initiatives. These were, however, partially offset by higher plant maintenance expense. Plant operating expenses were $281 million, up from $267 million in the first quarter of 2012.

In spite of the lower operating expenses, the year-over-year revenue decline led the company to incur an operating loss of $5 million in the reported quarter versus an operating profit of $3 million a year ago.  

Shareholder Returns and Liquidity

In the first quarter of 2013, Covanta Holding repurchased shares worth $24 million.  As of Mar 31, 2013, the company had remaining share repurchase authorization of $126 million. Also, during the quarter, the company increased its dividend by 10% to 16.5 cents per share, resulting in an annualized payout of 66 cents per share.


Covanta Holding reaffirmed its adjusted earnings guidance for full year 2013 in the range of 40 cents to 50 cents per share.


Covanta Holding’s top and bottom line missed the Zacks Consensus Estimates. However, the company is focused on increasing shareholder value by effectively running the business, capitalizing on growth investments and returning excess capital to its shareholders. We nonetheless remain concerned about stiff competition and an overall tepid macroeconomic outlook. Covanta Holding currently holds a Zacks Rank #3 (Hold).

Other energy companies that are currently performing well and warrant a look include Zacks Rank #2 (Buy) stocks Ameren Corporation (AEE - Analyst Report), CenterPoint Energy, Inc. (CNP - Analyst Report) and CMS Energy Corp. (CMS - Analyst Report).

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