Electric utility company Duke Energy Corp. (DUK) on Friday posted lower profit for the third quarter, as it recorded non-cash impairment charges related to the non-regulated generation operations in the Midwest. However, adjusted earnings rose from last year and topped the Street view. During the quarter, the company also experienced lower electricity sales, hurt by the recession.
Q3 Results
The Charlotte, North Carolina-based company's third-quarter net income attributable to Duke Energy Corp. was $109 million, down from $215 million in the year-ago quarter. On a per share basis, earnings attributable to Duke Energy common shareholders totaled $0.08, a decline from $0.17 in the same quarter of last year.
The company said its reported results for the recent quarter were impacted by non-cash impairment charges of about $400 million, primarily related to goodwill associated with non-regulated generation operations in the Midwest. These charges have no impact on the company's liquidity position and have been excluded from adjusted earnings per share.
Adjusted earnings per share for the latest quarter was $0.40, compared to $0.33 per share earned in the corresponding period of the previous year. On average, 13 analysts polled by Thomson Reuters expected the company to post earnings of $0.38 per share. Analysts' estimates typically exclude special items.
Quarterly operating revenues decreased to $3.39 billion from $3.51 billion reported in the comparable quarter of the previous year, and fell short of Wall Street analysts' consensus revenue estimate of $3.80 billion for the quarter.
Jim Rogers, Duke Energy's chairman, president and CEO, said, "We continue to perform well in this recessionary climate, matching cost reductions with the declines we're experiencing in usage by our industrial customers. We are maintaining our commitment to operational excellence and strong credit and liquidity."
Rogers added, "we haven't lost focus on building our business for the long-term, modernizing our fleet and achieving constructive regulatory recovery of our capital investments."
Segmental Review
The company's U.S. Franchised Electric and Gas or USFE&G segment generated third-quarter revenue of $2.50 billion, down from $2.69 billion last year. Segment EBIT was $716 million, compared with $726 million in the third quarter of 2008. Results were adversely affected by unfavorable weather throughout the service territory and a decline in weather-adjusted sales volumes to industrial customers compared to the third quarter of 2008.
Third-quarter revenues at the Commercial Power division advanced to $609 million from $498 million in the same quarter of last year. Segment EBIT loss from continuing operations totaled $234 million, versus a loss of $108 million in the previous year. Results were driven by lower by non-cash impairment charges primarily related to goodwill associated with non-regulated generation operations in the Midwest.
The company added that goodwill impairment charge reflects the current estimated value of the operations, which has declined principally as a result of sustained lower power prices and demand. Excluding the impairment charge, results were favorable due to prior-year mark-to-market losses on economic hedges and a prior-year emission allowance impairment due to the invalidation of the Clean Air Interstate Rule or CAIR.
Duke Energy International or DEI segment posted quarterly revenues of $293 million, a slight decline from the previous year's $297 million. Segment EBIT from continuing operations grew to $100 million from $77 million a year ago. Positive results were driven by lower commodity costs in Peru and favorable hydrology in Central America, partially offset by lower commodity prices at National Methanol Company and unfavorable average foreign currency exchange rates.
Other Metrics
Interest expense from continuing operations increased to $190 million from $176 million for the third quarter of 2008, primarily due to higher debt balances offset by lower average interest rates on floating rate debt and commercial paper balances.
Income tax expense from continuing operations for the most recent quarter was $244 million, compared to $132 million in the corresponding quarter of fiscal 2008.
The company further noted that through the third quarter of 2009, based upon adjusted per share earnings, the company is slightly ahead of its internal plan. Hence, the company is on track to achieve the employee incentive target of $1.20, based on adjusted per share earnings, assuming normal weather, continued cost control and solid operational performance, as well as no deterioration in the economy for the remainder of the year.
Year-To-Date Highlights
For the nine-month period, the company reported net income attributable to Duke Energy Corp. of $729 million, compared to $1.03 billion in the prior-year period. Per share earnings attributable to Duke Energy Corp. common shareholders was $0.56, down from $0.81 in the previous year.
Year-to-date, operating revenues for the nine months ended September 30, 2009 amounted to $9.62 billion, a decline from $10.1 billion reported last year.
Peer Performance
Among Duke Energy's rivals, American Electric Power Co. Inc. (AEP) posted an increase in third-quarter profit that totaled $443 million or $0.93 per share, compared to $374 million or $0.93 per share in the prior-year quarter, helped by rate increases and cost cutting. Revenues dropped to $3.5 billion from $4.2 billion in the same quarter of last year. For fiscal 2009, the company said it currently anticipates ongoing earnings in the range of $2.90 - $3.05 per share, raising its low-end of the prior outlook in the range of $2.75 - $3.05 per share.
Another peer, Constellation Energy Group Inc. (CEG) reported third-quarter nett income of $137.6 million or $0.69 per share, compared to a loss of $225.7 million or $1.27 per share in the year-ago quarter. Total revenues declined to $4.03 billion from $5.32 billion in the previous year.
Yet another competitor, Progress Energy Inc. (PGN) posted lower profit for the third quarter, totaling $247 million or $0.88 per share, compared to $309 million or $1.18 per share in the previous year. Operating revenues for the third quarter of fiscal 2009 amounted to $2.82 billion, an increase from the prior-year's operating revenue of $2.69 billion.
Stock Quotes
Duke Energy shares, which have been trading between $11.72 and $17.20 in the past 52 weeks, closed Thursday's trading session at $16.11.
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