DTE Energy Beats on Earnings, Lifts View

Zacks

DTE Energy Company (DTE) reported fourth quarter 2013 operating earnings per share of $1.01, beating the Zacks Consensus Estimate by 4.1%. The bottom line also jumped 18.8% year over year from 85 cents per share. The improved performances reflect increased weather-related sales.

2013 earnings also improved 3.8% year over year to $4.09 per share, beating our projection of $4.07 by 2 cents.

Operating Statistics

Total revenue at DTE Energy climbed 7.8% year over year to $2,533.0 million. The reported quarter's revenue surpassed the Zacks Consensus Estimate of $2,417.0 million.

Fuel, purchased power and gas expenses increased 18.4% year over year to $1,124.0 million. Operation and maintenance expenses moved up 3.7% year over year to $810.0 million.  

Total operating expenses escalated 10.1% year over year to $2,292.0 million. Despite the higher top line, spiraling expenses dented the operating income of the company by 9.7% year over year to settle at $241.0 million.

Quarterly Segmental Highlights

DTE Electric: Segment earnings were $101.0 million or 57 cents per share, up from $66.0 million or 38 cents per share in the prior-year quarter.

DTE Gas: Segment earnings were $52.0 million or 29 cents per share compared with $55.0 million or 32 cents per share in the fourth quarter of 2012.

Non-Utility Operations

Gas Storage and Pipelines: The segment generated a profit of $21.0 million or 12 cents per share, up from $13.0 million or 8 cents per share in the year-ago quarter.

Power and Industrial Projects: The segment posted a profit of $20.0 million or approximately 11 cents per share, up from $12.0 million or 7 cents per share.

Energy Trading: The segment incurred a loss of $2.0 million or 1 cent per share versus a profit of $9.0 million or 5 cents per share in the prior-year period.

Corporate and Other: Loss in the quarter was $13.0 million or 7 cents per share versus a loss of $8.0 million or 5 cents per share a year ago.

Financial Update

As of Dec 31, 2013, cash and cash equivalents were $52.0 million, down from $65 million as of Dec 31, 2012. At the end of 2013, long-term debt, net of current portion, was $7,214.0 million versus $7,014.0 million at year-end 2012.

Net operating cash flow in 2013 was $2,154.0 million versus $2,209.0 million in 2012.

Guidance

The company boosted its earnings per share guidance for 2014 to the range of $4.20−$4.40 from the prior range of $4.15−$4.39.

Our Take

DTE Energy’s fourth quarter as well as 2013 results came in above our expectation. The company’s cost-control efforts are yet to pay off as the quarter saw a substantial rise in operating expenses.

The company managed to lower residential electric rates by approximately 6.5% in Jan 2014. The Echo Wind Par − constructed last year − will commence operations very soon. This will bring the total amount of renewables that DTE has either built or contracted to 9.6% of sales, nearing its 10% goal for 2015.  

DTE Energy’s foray into wind energy generation is well-timed and will lend significant upside in the coming years owing to the Obama Climate Change program and an extension of the wind energy tariff.

Despite these positives, the present unfavorable macro backdrop remains our concern. DTE Energy presently carries a Zacks Rank #3 (Hold). Stocks that are worth considering in the space are Otter Tail Corporation (OTTR), CMS Energy Corp. (CMS) and Calpine Corp. (CPN). While Otter Tail sports a Zacks Rank #1 (Strong Buy), CMS Energy and Calpine hold a Zacks Rank #2 (Buy).
 

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