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COPEL (ELP) Q1 Earnings Decline Y/Y, High Expenses a Drag
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Companhia Paranaense de Energia – COPEL (ELP - Free Report) reported weak results in the first quarter of 2018. The Brazilian utility’s net income decreased 18.6% year over year to R$339.6 ($104.5 million).
The company’s earnings per share were R$1.21, down 19% from the year-ago tally of R$1.50. The American Depository Receipt (ADR) equivalent for the reported quarter was 37 cents while earnings in the year-ago quarter were 48 cents.
Revenues Improve Y/Y
In the quarter under review, COPEL’s net operating revenues were R$3,348.7 million ($1,030.4 million), increasing 1.6% year over year.
The top-line improvement was primarily driven by growth of 16.3% in electricity sales to final customers and 23.8% in revenues from telecommunications. However, these positives were partially offset by a decline of 14.7% in electricity sales to distributors, 32.6% in sales derived from the use of main distribution and transmission grid, 9.5% in construction revenues, 3.8% in sales derived from the distribution of piped gas and 7.7% in other operating revenues.
Electricity Sales Improve Y/Y
The company sells electricity to its final customers in the captive market through Copel Distribuicao and in the free market through Copel Geracao e Transmissao.
In the first quarter, COPEL’s electricity sales to final customers increased 1.2% year over year to 6,399 gigawatt hours. The improvement was driven by 9.6% rise in Industrial and 0.3% growth in Rural consumption segments. However, this was partially offset by 2.6% fall in Residential, 3.4% in Commercial and 1% in Other consumption segments.
Margin Profile Weak on Rise in Costs and Expenses
In the quarter under review, COPEL’s operating costs and expenses increased 11.1% year over year to R$2,786.6 million ($857.4 million). It represented 83.2% of net operating revenues versus 76.1% in the year-ago quarter.
Increase in operating costs and expenses was due to the rise of 10.6% in costs related to electricity purchased for resale, 86.1% in charge related to the main distribution and transmission grid, 27.5% in personnel and management costs, 3.2% in costs related to pension and healthcare plans, 71.8% in costs related to materials and supplies for power electricity, 10.2% in third-party services costs and 17.6% in provision and reversals.
However, the impact of higher costs and expenses was partially offset by a decline of 1.9% in costs related to materials and supplies, 6% in costs for natural gas and supplies in the gas business, 3.2% in depreciation and amortization, 23.6% in construction costs, and 21.2% in other costs and expenses.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were R$863.1 million ($265.6 million), inching up 0.3% year over year. Adjusted EBITDA margin was 25.8% in the quarter under review versus 26.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the first quarter, COPEL’s cash and cash equivalents were R$1,697.5 million ($514.4 million), increasing 63.2% from R$1,040.1 million ($314.2 million) at the prior-quarter end. Loans, financing and debentures grew 5.5% sequentially to R$7,822.2 million ($2,370.4 million).
In the reported quarter, the company generated net cash of R$641.4 million ($197.4 million) from its operating activities, reflecting year-over-year growth of 50.1%. Capital used for the addition of property, plant and equipment surged 154.7% year over year to R$503.3 million ($154.9 million).
During the quarter under review, COPEL distributed approximately R$2 million ($0.6 million) as dividends and interest on equity.
Outlook
For 2018, COPEL plans to use R$2,928.6 million in capital expenditures. Of the total, roughly R$743.6 million will be used for the Generation and Transmission business, R$790 million will be used for the Distribution business and R$340.2 million for the Telecommunications business. The rest will be utilized for improving other businesses.
COPEL currently has roughly $1.7 billion market capitalization.
Some major players in the industry are NRG Energy, Inc. (NRG - Free Report) , TerraForm Power, Inc. and Atlantic Power Corporation . While NRG Energy sports a Zacks Rank #1 (Strong Buy), both TerraForm Power and Atlantic Power carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last 60 days, bottom-line estimates for each of these stocks improved for the current year and the next year. Also, average positive earnings surprise for the last four quarters was 507.93% for NRG Energy, 114.71% for TerraForm Power and 7.24% for Atlantic Power.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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COPEL (ELP) Q1 Earnings Decline Y/Y, High Expenses a Drag
Companhia Paranaense de Energia – COPEL (ELP - Free Report) reported weak results in the first quarter of 2018. The Brazilian utility’s net income decreased 18.6% year over year to R$339.6 ($104.5 million).
The company’s earnings per share were R$1.21, down 19% from the year-ago tally of R$1.50. The American Depository Receipt (ADR) equivalent for the reported quarter was 37 cents while earnings in the year-ago quarter were 48 cents.
Revenues Improve Y/Y
In the quarter under review, COPEL’s net operating revenues were R$3,348.7 million ($1,030.4 million), increasing 1.6% year over year.
The top-line improvement was primarily driven by growth of 16.3% in electricity sales to final customers and 23.8% in revenues from telecommunications. However, these positives were partially offset by a decline of 14.7% in electricity sales to distributors, 32.6% in sales derived from the use of main distribution and transmission grid, 9.5% in construction revenues, 3.8% in sales derived from the distribution of piped gas and 7.7% in other operating revenues.
Electricity Sales Improve Y/Y
The company sells electricity to its final customers in the captive market through Copel Distribuicao and in the free market through Copel Geracao e Transmissao.
In the first quarter, COPEL’s electricity sales to final customers increased 1.2% year over year to 6,399 gigawatt hours. The improvement was driven by 9.6% rise in Industrial and 0.3% growth in Rural consumption segments. However, this was partially offset by 2.6% fall in Residential, 3.4% in Commercial and 1% in Other consumption segments.
Margin Profile Weak on Rise in Costs and Expenses
In the quarter under review, COPEL’s operating costs and expenses increased 11.1% year over year to R$2,786.6 million ($857.4 million). It represented 83.2% of net operating revenues versus 76.1% in the year-ago quarter.
Increase in operating costs and expenses was due to the rise of 10.6% in costs related to electricity purchased for resale, 86.1% in charge related to the main distribution and transmission grid, 27.5% in personnel and management costs, 3.2% in costs related to pension and healthcare plans, 71.8% in costs related to materials and supplies for power electricity, 10.2% in third-party services costs and 17.6% in provision and reversals.
However, the impact of higher costs and expenses was partially offset by a decline of 1.9% in costs related to materials and supplies, 6% in costs for natural gas and supplies in the gas business, 3.2% in depreciation and amortization, 23.6% in construction costs, and 21.2% in other costs and expenses.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were R$863.1 million ($265.6 million), inching up 0.3% year over year. Adjusted EBITDA margin was 25.8% in the quarter under review versus 26.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the first quarter, COPEL’s cash and cash equivalents were R$1,697.5 million ($514.4 million), increasing 63.2% from R$1,040.1 million ($314.2 million) at the prior-quarter end. Loans, financing and debentures grew 5.5% sequentially to R$7,822.2 million ($2,370.4 million).
In the reported quarter, the company generated net cash of R$641.4 million ($197.4 million) from its operating activities, reflecting year-over-year growth of 50.1%. Capital used for the addition of property, plant and equipment surged 154.7% year over year to R$503.3 million ($154.9 million).
During the quarter under review, COPEL distributed approximately R$2 million ($0.6 million) as dividends and interest on equity.
Outlook
For 2018, COPEL plans to use R$2,928.6 million in capital expenditures. Of the total, roughly R$743.6 million will be used for the Generation and Transmission business, R$790 million will be used for the Distribution business and R$340.2 million for the Telecommunications business. The rest will be utilized for improving other businesses.
Companhia Paranaense de Energia (COPEL) Price
Companhia Paranaense de Energia (COPEL) Price | Companhia Paranaense de Energia (COPEL) Quote
Market Capitalization & Key Picks
COPEL currently has roughly $1.7 billion market capitalization.
Some major players in the industry are NRG Energy, Inc. (NRG - Free Report) , TerraForm Power, Inc. and Atlantic Power Corporation . While NRG Energy sports a Zacks Rank #1 (Strong Buy), both TerraForm Power and Atlantic Power carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last 60 days, bottom-line estimates for each of these stocks improved for the current year and the next year. Also, average positive earnings surprise for the last four quarters was 507.93% for NRG Energy, 114.71% for TerraForm Power and 7.24% for Atlantic Power.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>