Electric utility company FPL Group Inc. (FPL) on Tuesday reported a 31% decline in profit for the third quarter from last year, as results at the company's rate-regulated utility subsidiary Florida Power & Light Co. continued to be negatively impacted by the weak economic conditions in Florida. Excluding items, adjusted earnings per share for the latest quarter increased 10% from a year ago, but missed analysts' consensus estimate. The company also lowered its adjusted earnings outlook for fiscal years 2009 and 2010, citing the dismal economic conditions in Florida and Texas.
Third-Quarter Results
The Juno Beach, Florida-based company's net income for the third quarter declined to $533 million, or $1.31 per share, from $774 million, or $1.92 per share, in the year-ago quarter. On an adjusted basis, net income for the latest quarter totaled $562 million, or $1.38 per share, up from $506 million, or $1.25 per share, in the same quarter last year. On average, ten analysts polled by Thomson Reuters expected the company to report earnings for the quarter of $1.41 per share. Analysts' estimates typically exclude special items.
Adjusted earnings exclude the mark-to-market effects of non-qualifying hedges and other than temporary impairments on certain investments, both of which relate to NextEra Energy Resources.
Quarterly operating revenues declined 17.1% to $4.47 billion from $5.39 billion in the year-ago period, and missed analysts' consensus revenue estimate of $4.96 billion.
Lew Hay, Chairman and CEO of FPL Group said, "Our basic earnings story has remained fairly constant over the past two years: NextEra Energy Resources continues to grow adjusted earnings and earnings per share, while Florida Power & Light remains challenged by the economic downturn in Florida."
Peer Performance
Raleigh, North Carolina-based Progress Energy Inc. (PGN) is slated to release its financial results for the third quarter on October 30. Analysts expect the company to report earnings of $1.18 per share on revenues of $2.80 billion for the quarter.
Atlanta, Georgia-based Southern Company (SO) is expected to announce its financial results for the third quarter on October 28. Analysts expect the company to report earnings of $0.99 per share on revenues of $5.50 billion for the quarter.
Segment Analysis
FPL Group's rate-regulated utility subsidiary, Florida Power & Light Company, reported net income for the second quarter of $306 million or $0.75 per share, down from $314 million, or $0.78 per share in the prior-year quarter. Florida's weak economy continued to have a negative impact on the segment's results. The average number of customers for the quarter was down by 9,000 on a year-over-year basis, while the number of inactive accounts rose by 4,000 since the end of the second quarter of 2009. The company added that Florida Power & Light's rate proceeding before the Florida Public Service Commission remains ongoing.
FPL Group's competitive energy subsidiary, NextEra Energy Resources, reported net income for the quarter of $233 million or $0.57 per share, down 52% from $483 million or $1.20 per share in the year-ago quarter. However, adjusted earnings for the subsidiary rose to $262 million, or $0.64 per share, from $215 million or $0.53 per share, in the previous-year quarter. The company attributed the 21% growth in adjusted earnings to the company's investment in new wind energy projects, including the positive effects of the American Recovery and Reinvestment Act, which allows the company to take the value of federal wind production tax credits in the form of cash grants.
In addition, strong performance from retail operations and the wholesale marketing and trading business also impacted the quarter's results. These were partly offset by unfavorable market conditions for the company's fossil power plants in Texas. The company noted that while the wind resource was above prior-year quarter, the wind resource across the fleet during the quarter was well below normal.
The company said it has 985 megawatts of wind projects either completed or under construction and has agreed to acquire an additional 185 megawatts of existing wind projects. Including the pending acquisition, the company now expects to add 1,170 megawatts of wind power in 2009.
The company's Corporate and Other segment incurred a loss for the third quarter of $6 million, narrower than loss of $23 million in the comparable quarter of the previous year.
Year-To-Date Results
For the nine months of fiscal 2009, FPL Group's net income increased to $1.27 billion, or $3.12 per share, from $1.23 billion, or $3.06 per share, in the same period last year.
Adjusted net income for the period was $1.33 billion, or $3.26 per share, up from $1.19 billion, or $2.94 per share, a year ago.
Revenues for the nine-month period declined to $11.99 billion from $12.41 billion in the prior-year period.
Outlook
FPL Group lowered its earnings outlook for fiscal year 2009, citing continued disappointment with the contributions from its Texas gas generation assets and another quarter of wind resource below expectations.
Accordingly, FPL Group now forecasts adjusted earnings for the year in a range of $4.10-$4.20 per share, compared to the prior range of $4.20-$4.40 per share. Analysts expect the company to report earnings of $4.22 per share for the year.
Further ahead, for fiscal year 2010, the company lowered its earnings outlook due to the challenging market environment for its Texas merchant assets and the continued uncertainty about economic conditions in Florida.
FPL Group now projects adjusted earnings for the year in a range of $4.25-$4.85 per share, compared to the prior range of $4.65-$5.05 per share. Analysts expect the company to report earnings of $4.71 per share for the year.
Stock Quotes
In Tuesday's regular trading session, FPL is trading at $51.29, down $0.84 or 1.61% on a volume of 1.53 million shares. In the past 52 weeks, the stock has been trading in a range of $40.61-$60.61.
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